Buyer should use the time for due diligence in an M&A deal to explore the relationships the company has with other companies and individuals. She should explore information about the company’s suppliers and human resources before finalizing the deal.
M&A due diligence: Supplier info
If a company has inventory, that inventory must come from somewhere. Therefore, Buyer needs to know all about a company’s suppliers and how that company makes purchases. Required information includes
Listing of major suppliers and dollar volume of purchases from each supplier
Listing of open purchase orders
Summary of the company’s purchasing policies
Contracts with suppliers or descriptions of any significant supplier agreements
Buyer may want to contact certain suppliers, but as with making contact with customers, Seller should wait until the end of the due diligence process before granting this request.
M&A due diligence: Human resources
A company’s most valuable assets, especially for consulting and service firms, are the assets that enter and leave the building each day: the employees. A Buyer is wise to understand during due diligence how the company hires, compensates, and accounts for employees. This information can include
Organizational chart for the entire company
Listing of employees with details of hire date, position, job description, and current pay rate.
All agreements with employees and consultants (typically these include employment or consulting agreements as well as non-disclosure, non-solicitation, and noncompete agreements)
Key employees’ résumés
Copies of executive compensation plans, including salaries, bonuses, commissions, vacations, club memberships, and so on
The company’s employee handbook, including all employee benefits and holiday, vacation, and paid time off policies
Documentation for retirement plans
Listing of employee benefits programs and insurance policies
Listing of all employee problems, including alleged wrongful termination, harassment, discrimination, and labor disputes
Listing of worker’s compensation claim history and unemployment insurance claim history
