Due Diligence Checklist for a Company Sale

Hours Updated on

Before a company is sold, buyers want to know exactly what they are getting into. This checklist provides a comprehensive overview of all documents and information that are examined during due diligence – legal, financial, business, and technological.

The list may seem dauntingly long. Prepare the documents early. A structured due diligence not only increases the chances of sale but also the selling price – through transparency, trust, and minimized risk for the buyer.

With this checklist, you keep track and ensure that your company is ready for inspection – clear, complete, and convincing.

Legal Due Diligence

Company and Structure

  • Current commercial register extract
  • Articles of association and bylaws
  • List of shareholders with participation quotas
  • Company organizational chart
  • Rules of procedure for management
  • Minutes of shareholders’ meetings / management meetings
  • Contracts between company and shareholders
  • Employee participation models (existing/planned)

Contracts & Investments

  • Important contracts (customers, suppliers, distribution partners)
  • Joint ventures, cooperation agreements
  • Overview of participations in other companies
  • Obligations for capital increases
  • Atypical contracts with liability risks or outside normal business
  • Overview of warranties and other liabilities

Liabilities & Financing

  • Overview of all significant liabilities including loans, leasing, guarantees
  • Bank accounts including balances
  • Off-balance sheet liabilities with significant impact
  • Currency management

Labor Law & Personnel

  • Sample employment contracts and performance structure
  • Managing director contracts
  • Bonuses, profit shares, variable compensation
  • Pension plans and social benefits
  • Works agreements, collective bargaining agreements
  • Staff reduction plans (if any)
  • Labor disputes in the last 3 years

Litigation & Authorities

  • Ongoing or threatened legal disputes
  • Proceedings against organs or employees
  • Disputes with authorities (e.g., tax, environment)
  • Risks due to legal violations

Taxes

  • Tax returns and assessments for the last 3 years
  • Reports from past tax audits

Intellectual Property Rights & R&D

  • Overview of trademarks, patents, licenses (including protection period significance)
  • Ongoing R projects including prospects of success and costs

Real Estate Leases

  • Ownership locations of strategic importance
  • Important rental, lease, or leasing agreements

Environment Sustainability

  • Environmental liabilities, expert opinions, studies (air, soil, water)
  • Requirements, complaints by environmental authorities

Insurances

  • Essential insurance policies (e.g., general liability, property insurance)
  • Uninsured risks
  • Damage cases > €50,000 in the last 3 years

Further Documents

  • Relevant permits and trade law requirements
  • ISO certificates
  • Internal reports and analyses

Financial Due Diligence

  • Annual financial statements, management reports, and audit reports of recent years
  • Current investment plan
  • Calculation scheme for pricing
  • Inventory list of tangible assets with valuations
  • Overview of credit lines and their utilization

Liquidity Reserve (“Cash Buffer Days”)

One point that buyers often examine more closely as part of the financial due diligence is the existing liquidity reserve – often referred to as Cash Buffer Days. This key figure shows how many days a company can cover its current expenses solely from existing liquid assets. A sufficient buffer signals resilience: the company can better cushion temporary slumps in orders, payment delays or unexpected cost increases without immediately relying on external financing. The calculation is simple:
• Daily expenses = annual payments / 365
• Cash Buffer Days = liquid assets / daily expenses
As a guideline, 30–90 Cash Buffer Days are considered solid in many industries, while capital-intensive or highly cyclical industries (e.g. industry, logistics, construction) tend to aim for 90–180 days. Service and software companies often manage with smaller buffers because their fixed cost structure is lower. Differences between countries arise primarily from different payment terms, financing culture and state security systems – for example, companies in the USA and UK often work with smaller buffers than companies in the DACH region (Germany/Austria/Switzerland), where traditionally higher liquidity is maintained.

Business Due Diligence

I. Business Model Market

  • Description of product / service offering
  • Transferability to other markets (e.g., internationalization)
  • List of key suppliers

II. Market Competition

  • Overview of main competitors
  • Competitive advantages of the company
  • Market volume trends

III. Sales Customers

  • Essential sales channels and structures
  • Customer list and current acquisition projects
  • Sales planning – feasibility compared to competition

IV. Organization Team

  • Organizational chart with role descriptions
  • Qualifications and key positions in the team

Technological Due Diligence

  • Technologies used and intellectual property rights (patents, designs, software)
  • Degree of innovation technological edge
  • Security concept (e.g., IT, data protection)
  • Scalability of systems processes
  • R activities