But, prior to taking their companies to market, what can business owners do to make the process of responding to these requests less painful? Most centrally, business owners should organize their companies' books and records, particularly the types of documents that potential buyers are likely to request. Without getting into specific detail, areas upon which potential buyers typically focus include the following:

Organizational and governance documents. Potential buyers will want to see organizational documents, such as articles of incorporation (for corporations) or organization (for limited liability companies), bylaws (for corporations) or operating agreements (for limited liability companies). Potential buyers will also typically want to see books and records—such as meeting minutes—relating to the company's governance.
Capitalization. Potential buyers will want to understand the company's capitalization. It can be very helpful to have a well-organized capitalization table, especially if the company has numerous owners. Potential buyers will also want to see other agreements relating to the ownership of the company, such as shareholders' agreements.
Contracts. Potential buyers will want to see the company's key contracts, such as contracts with customers and suppliers.
Indebtedness. Potential buyers will want to understand the company's indebtedness and see all documentation relating to that indebtedness.
Real Estate. Potential buyers will want to understand the real estate owned, leased or otherwise used by the Company and will want to review any real property leases.
Intellectual property and information technology. Potential buyers will want to understand the intellectual property, IT systems and related items and assets that are used in connection with the company's business.
Litigation. Potential buyers will want to understand any litigation involving the company, as well as any threatened litigation.
Labor & Employment. Potential buyers will want to review a list of the company's employees and contractors. Potential buyers will also want to review company's practices and procedures relating to employees and contractors and any agreements between the company and its employees or contractors.
Insurance. Potential buyers will want to review the company's insurance policies.
Other regulatory and compliance considerations. Potential buyers will want to understand potential regulatory and compliance risks relevant to the business. This could include areas such as environmental compliance, data privacy, health care licensing or other relevant areas.

The above list is not exhaustive. However, it should provide a sense of the types of legal due diligence requests that potential buyers are likely to make regarding a business.

Instant Insights /

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