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Business Transfers – Part 3: Seller Preparations

Business Transfers – Part 3: Seller Preparations

This third of the six-part series on Business Transfers will focus on seller preparations to be undertaken before initiating the sales process. This series focuses on a privately negotiated, non-auction transfer of a business or its ownership. To orient readers, we offered an Introduction to Business Transfers in Part 1 and Acquisition Objectives in Part 2. In subsequent parts of this series, we will address the following topics:

Part 4 – Acquisition Process

Part 5 – Acquisition Methods

Part 6 – Implementation

Seller Preparations for a Business Sale.

Time is the Enemy of a successful business sale. Pre-sale seller preparations are critical for reducing the time between a letter of intent and closing. In addition to enhancing the likelihood of a successful transfer, pre-sale preparations should increase the net “after tax” proceeds to the seller. Depending on the amount of work necessary, pre-sale preparations may require months to years. Launching an ill-prepared sales proposal into the market simply “wastes a bullet” and eliminates potential buyers. Just as you would not put your house on the market without repairs, clean up and staging, you should not put your business on the market with any less effort.

In addition to operational actions ideally implemented years ago to enhance the business’s value drivers, pre-sale preparations should include, at a minimum, preliminary valuation estimates for a “Go – No Go” decision, assembling the Seller Transaction Team and conducting pre-sale due diligence.

Seller Transaction Team. Most sellers have little to no experience in selling a business. A successful business transfer requires multiple advisors because no individual is capable of addressing all issues. Typically, seller transaction teams are comprised of the seller’s CPA, tax adviser (CPA or attorney with tax experience regarding business sales), attorneys with experience in the relevant legal areas, a valuation expert, and a brokerage or investment banking firm to market the business. Sellers may also engage an experienced consultant to manage the transaction team and the process.

“Go – No Go” Decision. Seller’s gating decision to being the sales process must be based on the adequacy of the net “after tax” sales proceeds to achieve seller’s financial objectives. For a “ball park” answer, the seller should obtain preliminary valuation estimates. If the net “after tax” sales proceeds based on estimated valuations are insufficient for seller’s financial needs, the Deal Team should review alternative structures to develop satisfactory outcomes. If a satisfactory outcome is unavailable, the seller need not waste money on the sales process and transaction team fees and charges. In addition to providing a basis for the “Go – No Go” decision, a preliminary valuation offers a reality check for seller’s pricing demands.

Pre-Sale Due Diligence. All businesses have warts. To avoid causing buyers to move to the next transaction due to doubts about the business or seller’s honesty, these warts should be identified and addressed before a buyer begins its due diligence. With sufficient lead time, issues can be corrected or minimized. Preemptive identification of significant issues and possible solutions tends to further a transaction instead of stalling or terminating it. To prepare for buyer due diligence which varies by buyer, industry and specific businesses, a seller should develop its own checklist and have its transaction team conduct due diligence. The following list offers a starting point for sample seller due diligence.


SAMPLE DOCUMENT AND INFORMATION REQUEST

A.       CORPORATE AND ORGANIZATIONAL

1.         Certified copy of certificate of incorporation of [entity whose stock or business is being acquired] (the “Target”), as currently in effect.

2.         Certified copy of by laws of the Target, as currently in effect.

3.         Access to minute books of the Target.

4.         Access to stock books and stock transfer ledgers of the Target.

5.         List of states and foreign countries in which the Target is qualified to do business, including names and addresses of registered agents and list of states and foreign countries in which the trade names of the Target are registered.

6.         Long-form good standing certificate, including payment of taxes for state of incorporation and every state and foreign country in which the Target is qualified to do business.

7.         List of states and foreign countries in which the Target files tax returns because of the ownership of property or conduct of business.

8.         List of states and foreign countries, if any, in which the Target is not qualified to do business and does not file tax re turns but in which it maintains an office, a stock of goods, employees, or an agent who is a resident of any state in which he or she solicits orders.

9.         Current organizational chart for the Target and organizational, operating divisions, and hierarchy of officers.

10.     All names under which the Target or any predecessor thereof has done business in the past five years.

B.        SUBSIDIARIES

1.         List of Target’s subsidiaries.

2.         Certified copies of certificates of incorporation and bylaws of each subsidiary, and access to minute books and stock transfer ledgers of each subsidiary.

3.         Information requested in items A.1 – A.9, shown separately for each subsidiary.

C.        SECURITIES

1.         Statement of outstanding and treasury shares of common stock, preferred stock (including a complete description of the rights attaching to such preferred shares), and any other securities of the Target and each subsidiary.

2.         Stockholders’ list, giving name and address of each stock holder of the Target and its subsidiaries and of any voting trustees, his or her affiliation with the Target, the type of security held, the date of issue by the Target (the consideration received by the Target therefor), and the number of shares of such security owned by each such stockholder or trust.

3.         List of holders of any options or right to purchase any securities of the Target (including warrants) giving name, number of options held, option prices, date(s) of grant, expiration dates, position in the Target or subsidiary, and number of shares owned (excluding those subject to option).

4.         Copies of all stock option agreements, stock option plans, and warrants.

5.         Copies of all stockholder agreements and all other agreements with respect to securities of the Target or its subsidiaries.

6.         All reports to stockholders of the Target prepared within the past five years.

7.         Indicate whether there are any stockholders or stock certificates whose whereabouts are unknown, or any stockholders from whom it will be difficult to obtain approval of the transaction or stock certificates, as appropriate.

8.         A description of all contractual restrictions on transfer of the Target’s capital stock or assets.

9.         Copies of registration rights or preemptive rights agreements.

D.       BUSINESS DESCRIPTIONS

1.         All market studies, feasibility studies, analyses, and similar reports concerning the Target prepared within the past five years.

2.         All marketing and other descriptive brochures regarding the Target prepared within the past five years.

3.         All press releases issued by the Target during the past five years and any press clippings that refer to the Target, if available.

4.         Recent analyses of the Target or its industries prepared by investment bankers, engineers, management consultants, accountants, or others, including marketing studies, credit reports, and other types of reports, financial or otherwise.

E.        FINANCING DOCUMENTS

1.         All currently effective loan agreements, indentures (including industrial revenue bond indentures), debt instruments, and other financing instruments, and all related material documentation, to which the Target is a party.

2.         A list of all mortgages, liens, pledges, security interests, charges, or other encum­brances to which any property (real or personal) of the Target is subject and all related material documentation.

3.         All correspondence with lenders and other debt security holders for the past five years (including all consents, notices, or waivers of default from lenders with respect to borrowings by the Target).

4.         Schedule of all short-term and long-term debt (including capitalized leases, guarantees, and other contingent obligations).

5.         Any presentations given to creditors in connection with obtaining credit or prepared for potential lenders in connection with any proposed financings.

F.         FINANCIAL STATEMENTS

1.         Audited financial statements, both consolidated and consolidating, for the Target and its subsidiaries for the past three fiscal years.

2.         All unaudited interim financial statements of the Target prepared since the date of the most recent audited financial statements.

3.         Separate consolidating statement for significant subsidiaries or divisions.

4.         Brief description of contingent liabilities involving the Target.

5.         Name of accountants and length of relationship with accountants; indicate whether the accountants own any interest in or hold any position with the Target or its subsidiaries.

6.         Management financial report to the directors, or any committee thereof, of the Target prepared during the past five years.

7.         Correspondence with the Target’s accountants prepared or received during the past five years, including all management letters from accountants.

8.         Brief description of depreciation policy.

9.         Brief description of nature of prepaid or deferred income or expenses.

10.     Copy of any sales projections and estimates, and copy of current budget and any budget projections including a discussion of any assumptions used in the preparation thereof.

11.     Brief description of any change in accounting policies or procedures during the past five years.

12.     Copies of all reports by accountants to management of the Target or any of its subsidiaries concerning the Target for the past five years.

13.     Brief description of outstanding commitments for capital expenditures in excess of $[Insert Threshold Amount].

14.     Any documents relating to material write-downs or write-offs of notes, accounts receivable, or other assets other than in the ordinary course of business.

G.       TAX MATTERS

1.         Copies of all federal, state, local, and foreign income and franchise tax returns filed by the Target and its subsidiaries for the past five years concerning the business, assets, or income of the Target or any subsidiary.

2.         All correspondence with the Internal Revenue Service or state or local tax authorities concerning adjustments or questioning compliance.

3.         List of returns and the years thereof that have been audited by federal, state, or local tax authorities, and copies of determination letters related thereto.

4.         List of state and local taxes to which the Target or any subsidiary is subject with respect to the business, assets, or income of the Target or any subsidiary, showing assessment date, date return is to be filed, and date tax due.

5.         Describe and provide copies of all agreement s, consents, elections, and waivers filed or made with the IRS or other taxing authorities, including, but not limited to, those relating to relevant statutes of limitations.

6.         List and describe all pending or threatened disputes with regard to tax matters involving the Target or any of its subsidiaries.

7.         Copies of any tax indemnification, tax sharing, or tax allocation agreements involving the Target and other members of an affiliated group, including any joint venture agreements that have the effect of tax allocation agreements, and a statement setting forth how such agreement was carried out for the past five years.

8.         Copies of all legal or accounting tax opinions received by the Target during the past five calendar years relating to the Target’s tax reporting.

H.       OFFICERS AND DIRECTORS, EMPLOYEES, BENEFIT PLANS, AND LABOR DISPUTES

1.         Name, address, and telephone numbers (home and business) of each director and officer of the Target and each subsidiary (and, if applicable, principal occupation), and aggregate compensation at present and for the previous fiscal year.

2.         All liability insurance policies for directors and officers of the Target or its subsidiaries.

3.         Number of persons employed by the Target and by each subsidiary in terms of function (executive, sales, clerical, research, labor, or other appropriate classification).

4.         Name and address of each person who has a power of attorney to act on behalf of the Target or any subsidiary, and copies of such powers of attorney.

5.         List of all labor union contracts and collective bargaining arrangements to which the Target or any subsidiary is a party, the number of employees covered by each such agreement, and the anticipated expiration dates thereof; and furnish copies of such contracts.

6.         Brief description of any “labor unrest” situations, all pending or threatened labor strikes, or other trouble experienced by the Target and its subsidiaries during the past five fiscal years.

7.         List and brief description of the current status of all unfair labor practices complaints lodged during the past three fiscal years involving the Target and its subsidiaries.

8.         Brief description of any pending or threatened request for arbitration, grievance pro­ceedings, labor disputes, strikes or disturbances affecting the Target or any subsidiary, and history of recent union negotiations.

9.         All performance bonus plans adopted by the board of directors of the Target during the past five years.

10.     Brief description and copies of all employee benefit plans, group life insurance plans, major medical plans, medical reimbursement plans, supplemental unemployment benefit plans or welfare plans (for hourly employees) or salary continuation plans, or other perquisites; and a brief description of policy regarding bonuses, salary review, severance pay, moving expenses, tuition reimbursement, loans, advances, vacations, holidays, sick leaves, and other benefits.

11.     For each pension or profit-sharing plan, including multiemployer plans, if any, furnish copies of plan documents, including amendments (and a description of any changes in these plans proposed, agreed upon, or under consideration); actuarial reports, if applicable; trust instruments and trust balance sheets, if any; summary plan descriptions; the latest application for determination to the IRS; any IRS deter­mination letter; and the latest Annual Report on Form 5500, 5500-C, or 5500-K.

12.     Details on any terminated pension plans and unfunded pension liabilities.

a.         List of all employees of the Target who received compensation exceeding $[Insert Threshold Amount] in the last fiscal year, giving name, date of birth, date hired, position, and compensation for the last fiscal year, and, to the extent available, similar information for all other employees and retired employees who are receiving or will be entitled to receive any payment not described previously in item H.9.

b.        Describe all written or oral employment or consulting agreements (other than union contracts) to which the Target or any subsidiary is a party or bound and, if any of the same are in writing, furnish copies thereof (except for employment contracts that can be terminated at will by the Target or a subsidiary without cost or liability).

c.         Brief description of all confidentiality, noncompetition, or similar agreements between the Target or any subsidiary and any of their present or former officers, employees, directors, consultants, or agents. If any of such agreements are in writing, furnish copies thereof.

d.        Brief description of all consulting and management agreements, arrangements, or understandings to which the Target or any subsidiary is a party, and, if the same are in writing, furnish copies thereof.

e.         Description of all defined compensation programs affecting officers, directors, or employees of the Target. State the amount accrued and/or paid during the most recent fiscal year under such programs, and amounts of accruals thereunder through a recent date.

13.     A description of the manner in which the Target fulfills its workers· compensation and unemployment compensation insurance obligations in each state (i.e., insured or self-insured, etc.).

14.     Documents representing or relating to workers’ compensation or disability policies, and any material claims with respect thereto.

15.     Copy of employee handbook or any similar document.

I.          PROPERTIES, LEASES, AND INSURANCE

1.         Real Property

a.         List of real estate owned, leased, or used by the Target, statin g whether owned or leased (whether as lessor or lessee) and brief description of property, structures, zoning, estoppel letters, reversions or remainder  lease provisions (including assignment and renewal), use, and location: furnish copies of mortgages, deeds, surveys, maps, profits, rights of way, easements, leases, and other contracts.

b.        Copies of title insurance policies or lawyers’ abstract reports covering real state.

c.         Copies of zoning variances and local permits.

d.        List of agreements with railroads, pipeline agreements, agreements relating to water rights (such as certificates of appropriation), mining claims (patented and unpatented), and royalty agreements.

2.         Other Assets

a.         List of fixed assets, machinery, and equipment (whether owned, leased, or used by the Target), giving for each material asset or group of assets cost, depreciation reserve, method of depreciation, insured value, estimated remaining useful life, condition suitability for use, and (if available) appraised value.

b.        List of automobiles, trucks, and other registered equipment owned, leased, or used by the Target, giving a brief description of equipment and lease provisions (if any), year made, state of registration, registration number, cost, estimated remaining useful life, and insured value.

c.         List of premises at which any assets of the Target are currently located or located from time to time, including (without limitation) terminals, plants, storage facilities, sales offices, and warehouses, and written agreements with respect thereto.

d.        Brief description of portfolio investments of the Target (except in subsidiaries), including cost basis and current value.

e.         All currently effective purchase contracts, leases, or other arrangements concerning material items of equipment used by the Target.

f.         All professional appraisals of any material property of the Target.

g.         List and brief description of all liens, security interests, or mortgages on the property of the Target or any of its subsidiaries, and location and name of office where documents or financing statements relating thereto are filed.

h.        Copies of all material leases of or security agreements for personal property of the Target, including conditional sales contracts, equipment leases, chattel mortgages, accounts receivable, financing agreements, and factoring agreements.

3.         List of all insurance policies relating to the business, assets, or properties of the Target (including directors’ and officers’ liability insurance), giving insurance company, policy number, term of coverage, property or risk covered, appraisal value of covered property (where appropriate), extent of coverage, annual premium, and amount of premiums that are prepaid or are unpaid from prior years. Furnish copies of all such policies.

4.         A description of all insurance claims (over $[Insert Threshold Amount] in amount) currently pending.

5.         Schedule of Target’s loss experience per insurance year.

6.         Copies of title insurance policies for all owned real state.

J.          INTELLECTUAL PROPERTY (PATENTS, TRADEMARKS, COPYRIGHTS, TRADE SECRETS)

1.         Schedule of patent registrations and applications identifying each patent by title, registration (application) number, date of registration (application), and country.

2.         Schedule of trademark (service mark and trade dress) registrations and applications identifying each mark and including date of registration (application), registration (application) number, status (that is, registered, renewed, abandoned, Sections 8 and 15 affidavits, submitted, etc.), and country or state where registered. In those instances where registration has not been sought, identify the mark, trade dress or trade name, and its date of first use anywhere in the United States.

3.         Schedule of copyright registrations and applications identifying each copyright by title, registration number, and date of registration.

4.         Manual or other written document detailing the procedures for maintaining the secrecy of trade secrets.

5.         Licensing agreements, merchandising agreements (naming Target as licensee or licensor), or assignments relating to patents, technology, trade secrets, trademarks (service marks), trade dress, and copyrights.

6.         Communications to or from third parties relating to the validity or infringement of Target’s patents, technology, trade secrets, trademarks (service marks), trade dress, and copyrights.

7.         Studies or reports relating to the validity or value of Target’s patents, technology, trade secrets, trademarks (service marks), trade dress, and copyrights, and the licensing or merchandising thereof.

8.         Agreements pursuant to which any patent, trademark, service mark, or trade name has been sold or transferred by or to the Target and evidence of recording thereof.

K.       CONTRACTS AND ARRANGEMENTS

1.         All standard forms of agreements used by the Target.

2.         All warranty agreements, including all forms of product warranties, of the Target currently in force with respect to completed and executory material contracts.

3.         A list and description of all significant oral contracts and commitments.

4.         All currently effective guarantees given by the Target concerning the payment or performance of obligations of third parties.

5.         All sales agency and distribution agreements.

6.         A list of all contracts and commitments under which a default has occurred or is claimed to have occurred, setting forth the following:

a.         Nature of default;

b.        Name of party in default;

c.         Monetary amount claimed; and

d.        Current status of contract or claim.

7.         A list of all contracts subject to renegotiation (indicating those contracts currently being renegotiated).

8.         All agreements to which the Target is (or was within the past five years) a party and in which any officer, director, employee, or shareholder of any such companies has (or had) an interest (whether directly or indirectly).

9.         Copies of all agreements not to be performed with in three months or involving over $[Insert Threshold Amount] whether or not entered into in the ordinary course of business, except (a) agreements for the sale of merchandise or standard sales order forms entered into in the ordinary course of business, and (b)  agreements referred to elsewhere herein.

10.     Copies of all contracts with advertising or public relations agencies.

11.     Copies of all standard forms of sales and purchase orders.

12.     A list of all significant suppliers (representing in excess of [Insert Threshold Percent] of annual purchases) of the Target, with an indication of the amount paid to each such supplier during the Target’s most recent fiscal year and the estimated number of alternative suppliers.

13.     All executory contracts, as amended to date, with each of the foregoing suppliers, and all related purchase orders.

14.     Brief description of contractual or customary credit terms available from suppliers and manufacturers, and copies of all agreements with suppliers and manufacturers.

15.     List and briefly describe all agreements and arrangements with distributors, dealers, sales agents, or representatives. Furnish copies of all such written agreements.

16.     List and briefly describe all agreements and arrangements whereby the Target or any subsidiary acts as a distributor. Furnish copies of all such written agreements.

17.     List and briefly describe all agreements relating to the supply of [identify critical material(s)] and other raw materials and supplies. Furnish copies of all such written agreements.

18.     Copies of all forms of product warranties or guarantees, if any, given by the Target or any of its subsidiaries.

19.     Copies of all agreements and other documentation relating to the acquisition of any business constituting a part of the Target, or sale or proposed sale of any business owned by it in the past five years.

20.     Copies of joint venture or partnership agreements to which the Target or any subsidiary is a party.

21.     Copies of all franchise or distribution agreements between the Target or any of its subsidiaries and any third party concerning the manufacture, sale, or distribution of the Target’s or its subsidiaries’ products or services. If any such agreements are oral, summarize the terms thereof.

22.     Copies of all agreements not previously listed with suppliers, independent agents, salespersons, or others involving the payment of commissions; or other consideration or discounts with respect to the manufacture, sale, or distribution of the Target’s or its subsidiaries’ products or services. If any such agreements are oral, summarize the terms thereof.

23.     Brief description of any contracts restricting the ability of the Target or any subsidiary to compete in any line of business with any person or entity, or committing the Target or any subsidiary to continue in any line of business.

24.     Advise if there are any facts or circumstances that may give rise to the cancellation or termination of, or claim for damages or loss under, any of the agreements, arrangements, or understandings referred to herein.

25.     List and describe all leases, licenses, agreements, and contracts involving the payment of more than $[Insert Threshold Amount] in the aggregate, currently in the process of negotiation.

26.     Copies of agreements granting to the Target any right of first refusal to acquire any business or assets, or pursuant to which the Target has granted any such 1ights.

27.     List the material term s of all contracts and arrangements for (a) trucking and other delivery and (b) warehouse space.

28.     Copies of all material research and development agreements.

29.     All technology license agreements to which the Target is a party, as licensor or licensee.

30.     Documents relating to the Target’s internal determinations as to whether it can, or should, fulfill a particular contract.

L.        LITIGATION

1.         List and brief description of each threatened or pending claim, lawsuit, arbitration, or investigation involving a claim for relief of $[Insert Threshold Amount] or more against the Target, any subsidiary, or any of their respective officers or directors.

2.         List and brief description of any pending or threatened (a) claim or litigation involving alleged violations of laws or regulations for the health or safety of employees or others, (b) governmental or administrative proceeding, (c) equal employment opportunity claim or litigation, (d) antitrust claim or litigation, (e) claim or litigation seeking injunctive relief, or (f) other material claim or litigation to which, in either case, the Target or any Subsidiary is a party.

3.         A copy of all complaints, answers, and other material pleadings concerning any litigation not fully covered by insurance.

4.         All letters from counsel to the Target to accountants relating to litigation or contingent liabilities involving the Target.

5.         All correspondence relating to actual or alleged infringement by the Target of intellectual property rights of others.

6.         All judgments, orders, and decrees to which the Target is subject.

7.         List and brief description of all outstanding judgments, decrees, or orders.

8.         Copy of most recent response to auditors’ request for information about litigation and/or contingent liabilities of the Target.

9.         All material governmental permits, licenses, etc., of the Target.

10.     Any litigation involving an officer or director of the Target concerning bankruptcy, crimes, securities law, or business practice (past five years).

11.     Description of any investigations of the Target, pending or threatened, by any federal, state, local, or foreign authorities.

12.     All correspondence with, reports of or to, filings with, or other material information about any other regulatory bodies that regulate a material portion of the Target’s business.

M.      ENVIRONMENTAL AND RELATED MATTERS

1.         All internal Target reports concerning environmental matters relating to current or former Target properties.

2.         Copies of any applications, statements, or reports filed or given by the Target or any of its subsidiaries with or to the Federal Environmental Protection Agency, any state department of environmental regulations, or any similar state or local regulatory body, authority, or agency.

3.         All notices, complaints, suits, or similar documents sent to, received by, or served upon the Target or any of its subsidiaries by the Federal Environmental Protection Agency, any state department of environmental regulation, or any similar state or local regulatory body, authority, or agency.

4.         All Target or outside reports concerning compliance with waste disposal regulations (hazardous or otherwise).

5.         Copies of all permits, shipping authorizations, manifests, and waste stream authorizations.

6.         Description of any processes of facilities currently or previously operated by the Target or any subsidiary (or by others on property currently owned by the Target or any subsidiary) that generate or are suspected of generating any toxic or other hazardous material.

7.         All pollution control capital expenditure reports (including budget requests) for the past five years.

8.         All annual reports, manifests, or other documents relating to hazardous waste or pes­ticide management over the past five years.

9.         All documents relating to equipment using PCBs, spills of PCBs, or worker exposure to PCBs, and all documents relating to the existence or removal of asbestos.

10.     Any public records reflecting existing or recent environmental problems.

N.       RECEIVABLES

1.         Brief descript ion of customary sales credit terms.

2.         Brief description of aging of accounts receivable, giving collections since aging date and brief statement of reasons for receivables in excess of $[Insert Threshold Amount] past due.

3.         Names of customers owing in excess of $[Insert Threshold Amount].

4.         Description of basis for establishing bad debt reserve.

O.       INVENTORIES

1.         List of products and services currently sold by the Target and its subsidiaries, together with applicable prices and discounts.

2.         Brief description of inventory pricing procedure.

3.         List of major sources of supply for [identify critical material(s)], dollar purchases from each in the last fiscal year, and brief description of available alternative supply sources for material items.

P.         ACQUISITION DOCUMENTS AND SALES OF SECURITIES

1.         All other agreements pursuant to which the Target has acquired securities or has issued (or may be obligated to issue) securities.

2.         All private placement memoranda, prospectuses, or other documentation relating to the offering or acquisition by the Target of securities.

3.         All reports to, documents filed with, and correspondence with the Securities and Exchange Commission for the past five years.

4.         All reports to, documents filed with, and correspondence with any state securities commission.

5.         All agreements and other documentation concerning any sale of material assets (including any agreements in principle) to which the Target is a party.

6.         Copies of all agreements and plans entered into by the Target or any of its subsidiaries relating to the acquisition of, or merger with, a business, or an interest in any business, whether by acquisition of shares, acquisition of assets, or otherwise.

Q.       LIABILITIES

1.         List and brief description of all long-term and short-term indebtedness of the Target and each subsidiary.

2.         List of guarantees or indemnity undertakings given by the Target or its subsidiaries.

R.        TRANSACTIONS WITH OFFICERS, DIRECTORS, AND OTHERS.

1.         List and statement of amounts and other essential terms of any indebtedness or other obligations of or to the Target or its subsidiaries to or from any officer, director, stockholder, or employee.

2.         List and description of assets or properties used by the Target in which any officer, director, stockholder, or employee has any interest.

3.         List of all material transactions between the Target and its officers, directors, stockholders, or employees not disclosed under items P.1 or P.2.

S.         CUSTOMERS

List of major customers and suppliers, showing percentage of sales to each customer or supplier accounting for more than 5 percent of sales or any product line or service within the past fiscal year.

T.        FILINGS AND REPORTS

Copies of any recent filings with governmental agencies.

U.       LICENSES

1.         List of all federal, state, local, and foreign governmental permits, licenses, and approvals (excluding those listed elsewhere herein) either held or required to be held by the Target or its subsidiaries for the conduct of their businesses.

2.         All correspondence, reports, and notices relating to laws and regulations administered by any federal, state, local, or foreign governmental agency for the past five years.

V.       CONSENTS

1.         List and brief description of any of the Target contracts, leases, security agreements, licenses, authorizations, etc., that may require the consent of any third party (including any governmental agency or instrumentality) to the proposed transactions.

2.         Indicate any other notification required to be given to or consents required from any third party (including any governmental agency or instrumentality) in connection with the proposed transactions.

W.      MISCELLANEOUS

1.         List of all bank accounts and safe deposit boxes, giving authorized signatories.

2.         List of memberships in trade associations.

3.         List of all requirements and obligations imposed on the Target by the proposed or effective rules and regulations of the Federal Trade Commission or any other governmental agency.

The foregoing list assumes that the Target is a corporation. If Target is a limited liability company, partnership and other entity, references to stock in the foregoing should be revised for the types of equity interests of Target.


As should be evident from the above discussion, Seller preparations require significant time and planning to maximize the likelihood of a successful sale and the sales price.

This blog does not establish an attorney-client relationship and does not constitute legal advice. Legal outcomes are based on the particular facts of a situation and the application of the law to those facts.  Anyone with issues described in this blog should hire an attorney for legal advice based on the relevant facts. The firm has no obligation to maintain the confidentiality of any information received by email or comments.

JD