Due Diligence Assessment Model

[Company Name] Due Diligence Assessment Model: Scorecard [Date] Gray cells will be calculated for you. You do not need to enter anything in them. Rating summary Financial performance Brand value Business condition Prospects for the future Competitive environment Human capital Quality of assets Structure of purchase transaction Other risks Total 3.0 4.0 2.0 1.0 4.0 3.0 3.0 5.0 4.0 29.0 Note: The current due diligence ratings use a scale of 5 as highest and 1 as lowest. You can change the scale to another one, but make sure that it runs lowest to highest down the column H2 though H6. Financial performance Due diligence item What is the current year profit (loss)? What is the previous year profit (loss)? What is the current year revenue? What is the previous year revenue? What is the current year gross margin? What is the previous year gross margin? What is the 3-year revenue growth trend? What is the industry average growth trend? What is the profitability and margin comparison versus the industry? How does revenue growth compare to inflation? Does the company have pricing power? Why or why not? Due diligence response The company reported GAAP net income of $2,100,000 with EBITDA of $2,800,000. Based on revenue levels, these figures are acceptable. Rating 3 Brand value Due diligence item Can the brand be leveraged to enter new markets or to resist economic downturns? Are a formal custodianship and an organization established to protect the brand? Can the brand be marketed globally? Due diligence response Rating 4 Business condition Due diligence item What is the current cost of entry into the industry? Is this cost rising or falling, and why? Does the need for expensive fixed assets or other large capital expenditures limit our ability to compete? Are inventory and equipment a large part of value? If the business is service oriented, can it hold on to key talent? Why or why not? Is there a strong culture? Due diligence response Rating 2 Prospects for the future Due diligence item What is the industry outlook? Are the products or services differentiating enough? Will the products or services soon be outmoded? If applicable, is the research and development program adequately funded? Is international competition emerging, or is it a current factor within the industry? What is the company's reliance on the overall economic conditions? Due diligence response Rating 1 Competitive environment Due diligence item How many direct and indirect competitors are there? What is the company's relative standing against its direct competition? Are there specific costs, processes, or technologies that limit competitive entry into the market? Due diligence response Rating 4 Human capital Due diligence item Do the company's products or services require special skills, education, or licensing? Is the work desirable within the job community? Are the environment and the culture considered suitable to the job community? How does the compensation rank versus industry averages? Is there a human resources strategy that promotes employee development? Are basic human resource compliance requirements met? If not, do the exceptions pose material legal risk? Due diligence response Rating 3 Quality of assets Due diligence item Real estate: Are the location and the facilities suitable for the business? Real estate: What is the underlying land value and quality of the title? Machinery and equipment: What is the degree of obsolescence? Machinery and equipment: What are the costs for repairs? What are the costs for deferred purchases? Due diligence response Rating 3 Structure of purchase transaction Due diligence item Will the purchase of the company be highly leveraged? What liabilities need to be assumed? Is the company safely capitalized in its current condition? How do cash flow ratios stack up against the industry and competitors? Due diligence response Rating 5 Other risks Due diligence item Is the labor unionized? Would critical staff remain if the company is sold? What is the general health of key personnel? Are heavy government regulations prevalent in the industry, or is there potential for such regulation? Are customer accounts diversified, or are there a few large accounts upon which revenues are dependent? Are operations unusually susceptible to weather, political events, or other generally uncontrollable events? Due diligence response Rating 4 Due Diligence Analysis Chart Other risks Structure of purchase transaction Quality of assets Human capital Competitive environment Prospects for the future Business condition Brand value Financial performance 0.0 1.0 2.0 Rating 3.0 4.0 .0 5.0 [Company Name] Due Diligence Document List [Date] Document list Financial documentation Current annual business plan 5 years of audited financial statements 3 years of federal and state tax returns 6 months of bank account history Insurance policies Liability Workers' compensation Life insurance on key personnel Health coverage Documentation of recent claims Other Legal documentation Articles of incorporation Amendments to articles Bylaws Office leases Other facilities leases Equipment leases Intellectual property Patents Trademarks Reviewed Yes Date reviewed 06/16/04 Notes Formal business plan exists; includes financials, strategic direction, and resource requirements for year Copyrights Trade secrets Strategic agreements Agreements with suppliers and vendors Selling agreements Special customer agreements Press releases or news articles regarding The company Competitors Suppliers The industry Research Industry publications Research reports Web site references Consultant documentation Other Available competitor information List of major customers List of major suppliers and vendors List of strategic partners and alliances Personal information about key employees to use for performing background or credit checks Signed permission forms to perform background credit checks