Due Dilligence





1.888.859.5388 | www.pavilionservices.com

What is due diligence?

due dil·i·gence

noun: due diligence

Reasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling


A comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets

and liabilities and evaluate its commercial potential.

Dear business owner,

Due diligence is a key aspect to satisfy the buyers requirement for information relating to all aspects of the business

being acquired.

Acquisitions and investments require due diligence to determine valuation, uncover risks, and identify opportunities for

post deal value creation. All successful sale transactions will need to navigate the due diligence process and in many

cases, business owners are unprepared for the process.

Buying and selling a business can be a very risky step to undertake, with more than half of all transactions failing to sell.

Ensuring due diligence in mergers and acquisitions are carried out the proper way can be less risky and improve your

chances of a successful transaction.

The purpose of this guide is to establish a process and manageable way of effectively collecting, assembling and

providing a safe and secure means of maintaining security of the key information that is being requested by the buyer.

I would encourage you to read it carefully, as all transactions involve this process and with Pavilion’s help, we can assist

you during the due diligence journey ahead.

Yours sincerely,

Greg Spafford

Managing Director

Table of Contents

What is Due Diligence? 3



Due Diligence


Corporate Structure & Organization




Financial Information


Customers, Suppliers, and Industry


Employees, Labour Relations, and Safety




Real Property, Equipment, and Assets




Intellectual Property




Tax Information


What Happens on the Closing Date?


Buyer’s/Seller’s Responsibilities




Pavilion Fact Sheet



Buyers should be looking for the following financial details:

• Sustainable margins and gross profit

• Investments that support growth

Buyers will also review and scrutinize the business

operations. In particular, look for:

• Highly-skilled employees able to handle high-level

functions as the business grows with new ownership

• Infrastructure that supports growth or potential expenses

to support future growth

• Diversification of product or service offerings and




The due diligence package and questions will vary from

buyer to buyer. A comprehensive package that is well

formatted and easy to understand will better position your

company for sale. When information is readily available,

there are no delays for a motivated buyer. The time involved

in compiling this information can be a few days, several

weeks and in extreme cases we have seen the process last

four months.

When you are ready to go to market and sell your business

for the best price in a timely manner, it’s important to be

prepared in advance for the journey ahead. Due Diligence

is a key part of the sale process and one area that usually

results in a significant reduction in the selling price or failure

to sell, if the information is not available or doesn’t exist.

What is Due Diligence?

After a Letter of Intent (LOI) is in place and signed by both

buyer and seller; the buyer is responsible for completing

financial and operational due diligence. Due diligence is the

process of investigating the claims made by the seller to the

potential buyer and review the operational aspects of the

business to be acquired with close scrutiny. Furthermore, the

larger the size of the transaction, the more comprehensive

the due diligence questions and information requested.

The seller will be required to release financial statements

to the buyer’s financial advisors so the business pro-forma

earnings which have been used to determine the valuation

and purchase price can be reviewed.

One of the key reasons that

businesses fail to sell or fail to sell

for maximum value is that the seller

is unprepared for the sale process.

If there is undue delay in providing

the information to the buyer, this

will cause doubt and hesitation that

may result in the loss of the buyer’s

interest and the sale will fail to close.

It is essential to prepare your documents for buyer scrutiny

and review. Using the information provided for the business

profile and valuation, as well as further details from literature,

and interviews, a complete package can be assembled.


Pavilion understands clients’ challenges and supports

every type of transaction. Pavilion provides unique

features such as:

• Complete document security — protect all PDF and

Microsoft Office files without sacrificing fidelity

• Clients can set up dedicated file templates, add users and


• Deal marketing platform — securely transfer deal

documents prior to due diligence

• Mobile access — our secure system manages all aspects

of the transaction, including adding new documents and


• Easy to upload documents to your own online data room


What is the Pavilion Data Room?

As detailed due diligence information is compiled, we will

store it in a secure data room that is available through

Pavilion. The data room is password protected to secure your

privacy of the information provided through a web portal.

Only buyers that have been qualified are given access to the

data room.

What’s in a Seller’s Data Room?

• Password controlled for secure access

• Full audit control and visibility of access by users

• Lots of storage space for financial files and reference


• Saves time by enabling preparation of information in

advance of due diligence

While we begin the process of marketing your business,

we recommend that you begin compiling the information

described in this document.

*Note: Some of the sections of this document may not apply to

your specific business.

It is impossible to anticipate every due diligence request that

a buyer may have. Periodically we may ask you for additional

information not discussed in this document.

Pavilion makes due diligence simple and secure. Organize

and share your private transactional documents in Pavilion

Business Service’s secure seller’s data room.

Pavilion provides one of the most comprehensive and

forward-thinking deal tools in the marketplace. We allow

clients to automate many tasks associated with due diligence

and prepare the information in advance.




On the following pages we have compiled a list of common

due diligence requests.

The information provided in the Business Profile will give

prospective buyers a detailed overview of your business.

After reviewing the profile and deciding that the business is

a good fit, a buyer will generally request substantially more

detailed information.

If the information and requested documents under certain

items are not relevant to, or available for the Company, or

are supplied under a different item, or have already been

delivered, please reference this and note it when you provide

the requested information and documents.

Buyers will want to scrutinize your records to verify that all of

the information is provided and accurate. In addition, buyers

want assurance of the information requested to reduce

their risk in buying the business. We have assembled the

questions into groups or categories to enable the process to

be as smooth as possible.

Please provide the requested information and documents

with respect to the Company and any subsidiaries or other

companies that hold the assets to be acquired as part of the

proposed transaction.

Please provide copies of all relevant and related documents,

irrespective of whether such documents are specifically





Please Provide:

• Minutes or record books the Company and all

subsidiaries and their predecessors (collectively referred

to hereinafter as the “Company”), including minutes,

resolutions, bylaws, certificate of incorporation,

amalgamation, name change and articles, etc.

• A current corporate organization chart indicating direct

or indirect ownership of all outstanding equity securities

of the Company and the Company’s ownership of or

interest in all corporations, joint ventures, partnerships,

trusts or other business organizations, together with a

description of the nature of such interest.

• A list of jurisdictions, organized by entity, in which the

Company carries on any material portion of its business.

• A current capitalization table of the Company setting

forth the issued and outstanding shares in the capital

of the Company as well as convertible securities, if any.

Table should include shares by type/series, giving the

number of authorized, issued and outstanding shares,

list of the holders of outstanding shares by type/

series, including any shares held in treasury and shares

reserved, and copies of all issued share certificates.

• Documents relating to any of the following rights

pertaining to the shares of, or other interest in, the

Companies: rights of first refusal or first offer and

other restrictions on transfer; pledges, liens and

other encumbrances; voting trusts, voting proxy and

other shareholders’ or voting rights agreements; and

shareholder buy/sell agreements and registration rights


• All private placement memoranda, prospectuses,

or other documentation relating to the offering or

acquisition by the Companies of securities, together

with all reports to and documents filed with any

governmental or regulatory authority.

• Other agreements, arrangements, or commitments

relating to the shares of the Companies.

• Rules of procedure for the Companies’ board of directors.

Material information or documents furnished to directors

and shareholders.

• General directions to management, including limitations

on its authority.

• All shareholders agreements relating to the equity

securities of the Company and all amendments to such


• A list of all officers and top management of the

Company and their current security holdings in the

Company, including each officer’s and manager’s area of

responsibility or oversight.


• A list of all directors of the Company and their

current security holdings in the Company, including

each director’s committee membership and outside


• A list of all names under which the Companies conduct


• Copies of any recent strategic planning documents,

market research reports or industry reports, if available.

• Copies of quarterly/monthly management reports for

last fiscal year and the current fiscal year-to-date (YTD).

These should include key metrics/statistics used to

manage the business.


• Copies of any environmental site assessments,

remediation reports or evaluations done for current and

former operations including soil, water and air sampling

or monitoring results obtained in the last five years and

any third-party remediation agreements to clean-up


• With respect to all owned or leased properties of the


a) All engineering studies and environmental reports;

b) Identification of all spills, releases, or cleanups

of oils, polychlorinated biphenyls, chemicals,

hazardous substances or other potential pollutants or


c) The identification of all on-site disposal locations;

d) Identification of asbestos at any presently owned or

leased property;

e) Any notices, orders or suits from or by any

governmental authority relating to environmental

matters, such as notices of violation or corrective action;

f) Any notices, claims or suits from any other party

raising environmental issues;

g) The identification of any property owned, leased or

used at any time by the Companies which is on any

environmental list;

h) A historical description of the Companies’ present

or formerly owned or leased properties, including a

description of the uses of such properties;

i) All last and present environmental permits (i.e., water,

air, hazardous waste, etc.);

j) All material safety data sheets and reports made or

filed by the Companies; and

k) Any consent decrees, judgments or agreements

relating to environmental hazards and conditions, if any,

with respect to such properties.



Financial records are critical to the sale process, as they

represent the basis of the financial performance of the

company. Most small businesses produce Notice to

Reader (NTR) and mid to larger firms usually have Review

Engagement Report (RER). In public listed companies

and larger organizations with multiple shareholders it is

mandatory to have audited financial statements. In all

cases, a Certified Public Accountant (CPA) will produce these

documents at the fiscal year end.

Whatever the size of your organization, the financial records

will come under close scrutiny by both the buyers, investors

and bankers who have their own team of specialist support

to guide them.

Unless otherwise noted, all financial information is requested

for the last three fiscal years and current fiscal period.

Financial Statements

• Externally reviewed consolidated financial statements

for the last five fiscal years, along with non-consolidated

entity financial statements.

• Detailed historical trial balances with account mapping

to the external financial statements for the last three

fiscal years.

• Budget-to-actual information/monthly reporting

packages for the last three fiscal years, including

management narrative (if any).

• Listing of significant inter and intra-company

transactions (e.g. rent, management fees, etc) for the

last three fiscal years.

• Forecast financial statements for the next two fiscal

years, including description of any key assumptions (i.e.

reason for revenue growth, equipment utilization, gross

margin increases or decreases, significant increases or

decreases in operating expense).

• Valuation reports previously commissioned by the

Companies or by others.

• Management letters or special reports by auditors or

accountants and any responses thereto for the last three


• Letters of counsel to auditors in connection with the

preparation of the financial statements.

• Details about any audit opinion qualified, denied or

adverse opinion rendered.

• Internally prepared monthly balance sheets and income

statements for the last three fiscal years.


Income Statement

Other Assets and Liabilities

• Revenue composition for the last two fiscal years and

current year (if possible) broken down by: (i.e. Revenue

by Service and Revenue by Sector).

• List and description of all one-time, non-recurring

expenses (or income) during each period that were not

part of normal operations (e.g. shareholder personal

costs, legal disputes, above market shareholder

compensation, severance pay, one-time gains, business

interruption details).

• Provide a schedule of shareholder compensation for the

last three fiscal years and current year.

• Reconciliations of income per financial statements and

taxable income for the last three years.

Working Capital

• Detailed aging of accounts receivable as of the last two

year-ends and the most recent month end available that

ties to the GL.

• Detailed aging of accounts payable as of the last two

year-ends and the most recent month end available that

ties to the GL.

• Detailed schedule of accrued liabilities (including

vacation payable) as of the last two year-ends and the

most recent month end available that ties to the GL.

• Summary of balance sheet reserves subject to

management discretion for the last two year-ends and

most recent month end available: bad debt/AFDA,

vacation, bonus plan, inventory obsolescence, etc.

• Bank reconciliation with supporting bank statements for

the last fiscal year end most recent month end available.

• List of banks, bank accounts, signature authority over

each account, and bank statements for each account for

the last year.

• List of investment accounts and investments, giving

account and investment information, location and

signature authority.

• Detailed schedule of prepaid expenses as of the last two

year-ends and the most recent month end available that

ties to the GL.

• Listing of any commitments and contingent liabilities not

already addressed (e.g., purchase obligations, guarantees,

contingent payments, etc.)

• Summary of present or contingent claims/counterclaims

in respect of taxes.

Other Assets and Liabilities

• Summary of liabilities to customs and excise authorities.

• Survey of pre-payments from customers and guarantees

connected thereto.

• All documents creating any express or implied warranty

with respect to products manufactured or distributed by

the Companies and all written disclaimers of any of the

Companies’ warranties.

• List and description of all recalls or post-sale warnings.

Property, Plant and Equipment

• Itemized listing of equipment/assets, including:

• Manufacturer

• Model

• ID #

• Year / Age

• Condition and Estimated Serviceable Life

• Cost

• Accumulated Amortization (including depreciation

policy (method and rates))

• Net Book Value

• Appraised value or estimated replacement cost

(including basis of estimates)

• Insured value

• Owned or leased

• Branch location (including assets not in the

Company’s possession)

• Please provide most recent appraisals (if any) on

equipment and land / building.

• List of new equipment to be acquired by the Company in

the current fiscal year (if any).

• Any documents relating to material write-downs or writeoffs

other than in the ordinary course.




One of the key components of the sale of any business is its’

customers and suppliers. The buyer is buying the entire list

of clients and will need assurance of the supply chain. While

sensitive information on key customers and suppliers should

not be provided until the exchange of signed purchase

agreement contract; basic information will be required by the

buyer to provide assurance of continuation of their business.

In addition, industry trends are also critical to the sale process

primarily because the buyers want assurance of growth

potential in your sector.

Please Provide:

• Revenue breakdown of Top 10 customers for the last five

fiscal years, including gross margin if available. Include a

summary of products/services sold and turnover rate.

• Schedule of key terms for Top 10 customers including

services provided, length of relationship, type of

contract, pricing structure, etc.

• Describe the current status of relationships and future

growth prospects with top customers.

• Summary of major projects for the last five fiscal years,

including client, location, scope of work/services

provided, sector, revenue, gross margin (if available),

type of contract, pricing structure, and estimated

term of project. Also provide any details on significant

subcontractors used on projects (scope of work, type of

contract, pricing structure, etc.)

• Top 10 suppliers/subcontractors by purchases in dollars

over the last five fiscal years, including the numbers of

years the Company has had a relationship with them,

summary of materials, products or services supplied to

the Company, and turnover rate.

• Discussion of significant new customers and any lost

customers over the last three years. For key customers

lost (if any), include reasons for loss.

• Description of any key industry groups, industry

memberships, or partnerships that the Company or its

employees belong to.

• All correspondence between the Company and any

major customer relating to the termination or proposed

termination of services.

• List of accountants, law firms, investment or merchant

bankers, and business consultants used by the Company.

• Reports, engineering studies, recommendations, etc.,

prepared by the consultants, advisors, or auditors of the


• Current project backlog summary (WIP and future

pipeline/backlog), including: project name, customer

name, total contract value, term of contract, industry

category, type of services, work completed to date/

billed to date, expected future revenue for this year and

next year, estimated gross margins, type of contract, and

pricing structure.

• Sample copies of any standard sales or order forms or

other agreements used in dealing with customers.




The subject of employees is a sensitive area at the best of

times and it is widely recognized that all businesses are

dependant on the employees to operate and manage

the business enterprise. So it is essential that appropriate

systems, policies and procedures are in place to protect

the buyer after the acquisition is complete. Depending on

whether the transaction is a share sale or an asset sale – both

buyer and seller need to protect their interests. In essence,

buyers are going to be asking a lot of questions in this regard

and it is essential to be prepared well in advance of the time

when the information is required, such as:

• Organizational chart showing key management names,

titles, and reporting lines.

• Bios of key people (managers, supervisors, leaders)

outlining their role, responsibilities, time with the

company, experience and education.

• Detailed current employee listing by department (e.g.

sales, admin, finance, operations) including name, title,

branch location, start date, salary, bonus structure,

stock options, golden parachutes or change in control

protection, overtime payments, holiday payments, loans,

sales commissions, and other forms of compensation.

• Schedule of all compensation paid to officers, directors

and key employees for most recent fiscal year showing

separately salary, bonuses and non-cash compensation

and benefits.

• Copies of employee handbook, personnel manuals,

Company rules, and benefit plan documents.

• Benefit plans including, but not limited to pension,

retirement, medical, health, life insurance, bonus,

deferred compensation, severance, vacation and other

fringe benefit plans, including insurance contracts, trusts

or other funding agreements, actuarial reports, summary

plan descriptions and booklets or other material used to

communicate benefits to employees and beneficiaries.

If applicable, provide any evidence of tax qualification

under applicable tax regimes and all documentation

related to such qualification.

• Illustrations of benefit calculations for all defined benefit

plans and statements of accrued benefits prepared for

each employee; illustrations of allocations for all defined

contribution plans and statements of accounts prepared

for each employee and any relevant documentation

related thereto.


• Non-compete and non-disclosure agreements

pertaining to officers, employees or consultants.

• Most recent WCB, WorkSafe or similar annual rating

statements (premium, discount) by entity.

• Summary of safety programs, policies, practices and

certifications, including copy of HSE manual.

• HSE statistics for the past two years and YTD.

• Details of any plans providing RRSP and/or pension


• Details of employee bonus plans, profit sharing, LTIP,

STIP or similar. Is there a written policy? Or is it informal

and discretionary?

• If unionized, a copy of current collective agreements,

including amendments, schedules and exhibits.

• Summary of negotiations regarding salary, pension,

working conditions and other employment matters.

• Summary of any labour disputes and correspondence,

memoranda or notes concerning any pending or

threatened labour stoppages.

• Summary of negotiations with any group seeking to

become the bargaining unit for any employees.

• Summary of outstanding claims associated with

sickness, employment termination and other matters

related to employment.

• Details the company’s policy and practice in relation to

illness and all forms of leave.

• Employee turnover rate and lay-offs during the last three


• Copies of employment agreements (including

supplements) for all employees.

• Discuss any major management losses and reasons (last

three years).

• Any significant recent and/or anticipated changes in

employees’ compensation?


In most instances, sellers have some form of debt in terms of

mortgages, loans, lines of credit, leases or security provided

to lending institutions that will need to be paid and settled

or transferred at the time of the close of the transaction.

• Schedule of all debt and capital leases outstanding, as

of most recent period and prior fiscal year-end with

key terms (principal, interest rate, maturity, restrictive

covenants, prepayment premiums).

• A schedule detailing intercompany debt owing to or

from all affiliates that ties to the GL.

• A schedule detailing due to/from shareholder amounts

that ties to the GL.

• Loan agreements to which any of the companies is

a party, guarantor or surety including bank credit

documents, indentures, promissory notes, guaranties,

and any other documents representing indebtedness

for money borrowed and any security agreements,

mortgages, pledges, etc. related thereto, including intercompany


• All correspondence with any lender relating to

amendments or waivers regarding such agreements or

alleging that any of the Companies is in default under

any such agreement.

• Outstanding letters of credit and performance and other

bonds issued by or for the account of the Companies.

• Most recent financial report sent to bank covering

covenant analysis.




The place of business is usually a key component of the

operations of the business and depending on if the property

is leased or owned, key questions will need to be answered

to provide protection and ensure continuation of the

business. If the property is leased, then the transference

of the lease to the new owner will need to be addressed. If

the property is owned and the buyer either wants to lease

or buy the property, then more information will need to be


• List of all property/facilities occupied by the Company,


* facilities description (sq. footage, owned/leased,

address, etc.)

* key lease terms for any leased facilities (rent, renewal,


* dates of acquisition and disposition over the past three


• Copies of all real property leases or other occupancy

agreements relating to the land leased.

• Proposed term sheet for three year lease agreement for

current leased premises. Support for proposed lease

rates (i.e. fair market value rates).

• Surveys relating to any real property owned or leased by

the Companies.

• Notices of building code and/or zoning violations

or with respect to nonconforming uses from any

governmental or regulatory authorities with respect to

property owned or leased by the Companies. Notices of

violation or alleged violation of any of the terms of any

lease by the Companies, whether given or received by

the Companies and whether as lessor or lessee.

• Brief description of each major equipment used in the


• Over the past three fiscal years and the current

YTD, what is the average annual amount spent on

maintenance and general recurring expenses for capital

equipment versus growth expenditures (i.e. acquisition

of new equipment)? The total of these two amounts

should tie to the financial statements (total of repairs &

maintenance and fixed asset additions).

• Major equipment utilization rates and/or revenues for

the past three years, and next year’s forecast, including

any comments about planned capital expenditures and

increased fleet capacity.


• Please describe the impact of any capital expenditures

on fleet capacity over the previous three fiscal years.

• Schedule of all operating leases for equipment used by

the Company (e.g. vehicles, computers).

• Details about any major capital expenditure anticipated/

required within the next three years.

• Documents relating to the ownership, lease or use of

real or material personal property, including all deeds,

bills of sale, leases, grants, licenses and easements, title

searches, PPR searches, and title insurance policies.

• Encumbrances with respect to all real or personal

property, including all mortgages, deeds of trust,

security agreements, pledges, chattel mortgages,

conditional sales agreements and restrictive covenants.


Buyers are naturally risk averse and they will want full

disclosure of any legal action that the company is involved in.

This often involves either Government agencies, suppliers or

customers and in some instances employees.

They will reuqire:

• Description of pending or threatened civil legal, or

government proceedings and any legal proceeding

settled or resolved within the last five years to which any

of the Companies is or was a party, or as to which any of

its property is or was subject. Include the name of the

court or government agency in which the proceedings

are/were pending, the date instituted, the parties

thereto, the basis therefor, the relief sought, the outcome

if resolved or settled, amount of available insurance and

whether or not any insurer disclaimed coverage.

• All pleadings and correspondence regarding the above.

• Complaints from any governmental agency, customer or

competitor concerning pricing practices.

• List of all orders, writs, decrees, injunctions, judgments

or rulings by any court or agency which may bind the

Companies or as to which any of its property is subject.

• Summary of disputes with suppliers, customers, and


• Confirmation by the Companies’ legal counsel that all

relevant information has been disclosed.



There are many forms of Intellectual Property (IP) and

in many cases, successful companies have taken steps

to register and protect this valuable asset in different

jurisdictions or regions. If your firm has IP in place, this adds

value to your organization and will need to be disclosed as it

will comprise part of the sale transaction.

• A list of all corporate names, trade-names and business

names of the Company, including nature of name (e.g.,

corporate name or business name), jurisdiction and

registration number.

• Agreements relating to patents, trademarks, trade

names, copyrights, technology, know-how and any other

intellectual property.

• A list and description of all intellectual property of

the Company, including trademarks and applications,

copyrighted works and applications, patents and

pending patent applications, domain names, design

rights, and any other subject matter that the Company

considers intellectual property. Also include invention

disclosures and unregistered trademarks or trade

names, and internet domain names owned by the

Company, indicating the current record owner, copies

of all assignment documents evidencing transfers not

yet recorded, and copies of all documents evidencing

changes not yet recorded.

• A list and description of all Company certificates.

• A list and description including the status of any claims

(including potential claims), demands or proceedings

that have been asserted against Company or any

suppliers, customers or licensees of Company in relation

to Company’s business, products or services or the

intellectual property identified above.

• A list and description including the status of any claims,

demands or proceedings, including litigation against

a third person alleging that such third person has

infringed, violated or misappropriated the intellectual

property of the Company and trademark oppositions,

that have been asserted by the Company or any licensee

of the Company.

• Summary of procedures and policies regarding the

protection of trade secrets.

• Information on any sharing of technology or research

and development between third parties and the

Companies or between the Companies and other


• Information on new products and current research and

development of the Companies, including any analyses

of intellectual property held by competitors which may

affect new products.



The days of “hand shake” agreements are diminishing and

buyers will want specific details relating to any form of

agreements or contracts that you have in place. This may

involve suppliers, clients, employees, resellers or distributors

and anyone else who has some form of relationship with the


Please Provide:

• Listing of all material agreements and copies of


• Supply, distribution, product development, out-sourcing

and joint venture agreements.

• Option agreements to which the Companies are party

relating to real or material personal property.

• Agreements with consultants or independent

contractors for services to the Company or its customers.

• Marketing, advertising, promotion, sales, franchise,

distribution, commission, agency or representative

agreements, and a list of independent sales persons or


• Agreements or arrangements (including financing

agreements) between or among the Company and

any affiliate thereof, including officers, directors,

shareholders, partners, members, managers and

employees, any of their respective relatives or affiliates,

or any other corporation or enterprise in which any such

officer, director, shareholder, partner, member, manager,

employee, relative or affiliate thereof, at the time of the

agreement had, or now has, a 5% or greater equity or

voting or other substantial interest. List of any customers

with whom the Company does not deal on an arm’s

length basis.

• Derivatives, hedging, or foreign exchange agreements

of the business and summary of the Company’s policy in

respect of the management of such agreements and the

transactions made pursuant to them.

• Indemnity agreements.

• Any agreements negotiated or in force which might have

a material effect on the Company’s operating results

including any agreements which upon termination or

expiry, could have a material effect on the Company’s

operating results and any agreements which may be

terminated or altered upon transfer of ownership.

• Outstanding offers that may legally bind the Company

by third party acceptance and all agreements which

impose material purchase or repurchase obligations on

any of the Companies.

• Loss creating agreements or agreements outside the

normal course of business of the Company.

• Non-competition agreements to which the Companies

are party.


• Powers of attorney granted and other agency


• Government contracts and documents relating to any

government debarments or other disqualification to be a

government contractor.

• Agreements restricting sale of the business of the


• Agreements and documentation for the last five years

to which any of the Companies is or was a party, relating

to any business combination or any material acquisition

or disposition of assets, whether or not consummated.

Letters of inquiry, formal offers from prospective

purchasers, and summary of any conversations with

prospective purchasers, in the last five years.


• Information whether a sale/merger of Companies will

result in the release or trigger of any special rights of

employees, shareholders, or third parties.

• Agreements, including a description of any oral

agreements, involving any amount in excess of $10,000

per year not covered by any other provision of this


All profitable businesses pay taxes and buyers will need

assurance that remittances for payroll, assessments and

year end taxes are paid in full. In addition, the tax records

provided should increase the confidence of buyers that the

organization doesn’t have any outstanding obligations to the

Canada Revenue Agency (CRA).

Unless otherwise noted, all information is requested for the

last three tax years and for the most recent interim period.

Financial Statements

• List of all jurisdictions (provinces and foreign countries)

where each of the target entities (a) files tax returns;

(b) locate employees; (c) locate assets; or (d) have

employees or agents that reside or make regular visits.

• Income tax returns/tax statements for all types of

taxes and all supporting work papers for the Company,

including SRED forms (if applicable) and all other

schedules for the past five years.

• All Notices of Assessment and Reassessment for the past

three taxation years.

• Information with respect to any governmental or

regulatory authority audit of the Companies’ returns and

the results of each audit.

• Information with respect to any tax elections made.

• Evidence of the Companies being current on sales tax,

unemployment, social security, and other tax payments.



Insurance is a risk mitigation tool used by companies to limit

their liability in specific events and there is a wide range of

insurance solutions that are used by companies. Buyers will

want to know the current coverage in place and any record

of prior claims, including:

• Cover sheet summarizing coverage, together with copies

of all major insurance policies related to the business

of the Company. List of all casualty, general liability,

products liability, workers’ compensation, business

interruption, directors, officers, key-man, and any other

insurance contracts and policies in effect currently and

during the last five years, identifying the carrier, type of

coverage, limits of coverage and annual premiums, and

copies of all such policies.

• Description of all claims made under the policies listed

above within the last five years.

• List of all disputes and claims made or pending with

insurance companies or denials of coverage and reports

or correspondence regarding the adequacy of coverage.

• Specification of liabilities assumed and warranties given

by the Company which are not covered by or in conflict

with insurance policies taken out by the Company.

• Copies of any key man and director/officer insurance


Sales and Marketing

A buyer wants assurance that the business operates in an

effective manner regards to sales and marketing. It will

become apparent during the transaction process that the

buyer’s interest is protected after the sale is complete.

Information needed:

• Describe how the Company sells its services, the typical

sales cycle, and key employees or other people involved

in selling.

• Describe the Company’s process for setting its pricing

• Provide typical bid documents for small, medium and

large projects.

Information Technology

Most companies utilize a range of software and hardware

solutions to enable their businesses to operate and run

effectively. Buyers will want full disclosure of the types of

solutions that your business has in use, including:

• A list and description of all software, hardware, designs,

plans, concepts, computers and other technology or

intellectual property which have been developed,

acquired by or which are used under license by the

Company and which is material to the business.

• Description of the accounting systems and version used

by the Company.

• Description of any other key systems and software

used by the Company, including any dispatching and

maintenance systems together with a brief description

of any unique reporting capabilities of these systems.

Permits, Licenses, and Certfications

Providing the buyer with all permits and related documents

to licenses and certifications is one of the final documents to

assist in the sale process.

Please provide the following:

• Permits, licenses, approvals, certifications, qualifications

and consents, and all documents relating to any

alleged violation, or to any past, pending or threatened

termination, suspension or revocation thereof, or to any

other claimed deficiency with respect thereto.

• Material reports, forms or other documents filed by

the Companies with any governmental or regulatory

authority for the last five years.

• Correspondence between the Companies and any

governmental or regulatory authority for the last five

years, including any reports, notices or correspondence

relating to any purported violation or infringement of

any governmental law, rule, guideline or regulation.

• List and description of all regulatory actions taken

against, or investigation of, the Companies for the last

five years and the outcome or anticipated outcome.

• Describe the marketing strategy including the efforts to

gain share with existing customers and new customers.




The actual closing of the transaction will take place at a

mutually agreed upon location with legal representation


At the time of close, the seller’s transfer of ownership will

include (but is not limited to) the following:

• All deeds of conveyance, bills of sale, transfers and


• All approvals to validly assign leasehold property and

material contracts

• Possession of the assets

The buyer’s transfers will include (but is not limited to) the


• Agreement to assume and pay or perform and indemnify

the seller against the assumed indebtedness and other

obligations included in the transaction

• A certified cheque or banker’s draft to be held in trust for

the portion of the purchase payable in cash

The transfer at closing signifies the end of a deal that started

months earlier and represents the start of a new business

opportunity for the new owner.

• Release of any liability that the buyer is not assuming


Buyer Responsibilities

The buyer is responsible for:


FOR THE TRANSACTION – This should be

completed before the due diligence process

begins and should include a contingency

plan if one source of financing is not



Do this as early as possible so any problems

can be resolved right away. If there are

problems, be prepared to have a reasonable

compromise for the seller’s consideration.


– As soon as possible, apply for any business

permits as they may take significant time to

be processed.



The buyer provides the first draft of these

documents. These documents need to be

reviewed by the buyer’s legal team before

being submitted to the seller.

TAKING INVENTORY – Prior to closing,

confirm the condition, quality and status

of the business to ensure they meet

expectations to date.


to closing, take an actual physical inventory

count to ensure the business assets are as

they claim.

Seller Responsibilities

The seller is responsible for:


lease is involved it needs to be presented

and prepared by the seller. This should be

done early so the terms can be reviewed and

resolved without impacting the closing date.


– If the seller is providing financing to the

buyer, generally they are responsible for

preparing the contract. The buyer should

confirm that the seller is getting this ready.



This needs to happen before closing so

the liability is not transferred to the new

owner. Generally the Business Broker or

Merger and Acquisition Specialist working

with the seller will ensure that these debts

are being arranged for appropriately. Legal

representation is essential at this stage.



will need access to the facility to ensure the

assets are as they have been presented.


DOCUMENTS – As per the terms of the

Purchase Agreement, the seller may be

responsible for providing a number of legal

documents necessary to close the deal.




needs to help close the deal without causing

unnecessary and costly delay.




Pavilion Fact Sheet


Pavilion Business Services is an independent Merger &

Acquisitions (M&A) advisory firm operating and serving

Canada’s small to mid-cap market. Pavilion provides

specialized advice to management teams of publicly and

privately-owned businesses. Pavilion’s team of experts

are comprised of M&A Specialists, Business Consultants,

Succession Planners, Valuation Experts and Marketing

Specialists. Our team provides advisory

services in the areas of:

• Succession /

exit planning

• Mergers &


• Raising capital

• Business


• Corporate


• Business growth strategies

Pavilion specializes in working with companies and

organizations with typically $2 million – $500 million in

annual revenue.

International Buyers

Pavilion’s extensive networking partners allow us to provide

business advice on an international scale with direct access

to buyers and investors in over 120 countries. We work with

professional equity, strategic buyers and investment firms

from USA, Europe, Middle East, China and Australia.

North America is increasingly being regarded as the

preferred location for business investments. Established

businesses with a solid cash flow are in huge demand from

buyers around the world.

Corporate Information

• Serving clients across Canada

• Attracting strategic and investment buyers across the


• Financial analysis specialists

• Access to domestic, national and international


• Skilled and experienced negotiators

Advantages of Working with a

Merger & Acquisitions Advisor

Pavilion has acted for many respected businesses to

structure, negotiate and execute significant corporate

financial transactions and has successfully completed

numerous transactions in the mid-cap market space.

The advantages of working with Pavilion include:

• Access to objective advice, professional insight and


• A strategic partner that keeps your best interests in

mind throughout the transaction

• Essential market intelligence both locally, nationally

and globally

• The ability to maximize transaction value based on

our experience and track record

• Access to pre-qualified investors/buyers


The Pavilion management team instinctively know that

great companies are built on the principle of doing the right

thing each and every day, and treating business partners,

customers, and employees honestly, fairly and with respect.




Our mission is to deliver exemplary personal service

to enable our clients to achieve their goals.


1.888.859.5388 | www.pavilionservices.com

More magazines by this user
Similar magazines