[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 8.0
Brand value 4.0
Business condition 2.0
Prospects for the future 1.0
Competitive environment 4.0
Human capital 3.0
Quality of assets 3.0
Structure of purchase transaction 5.0
Other risks 4.0
Total 34.0

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 Due diligence response Rating
What is the current year profit (loss)? The company reported GAAP net income of $2,100,000 with EBITDA of $2,800,000. Based on revenue levels, these 3
figures are acceptable.
What is the previous year profit (loss)? 5

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?

Brand value
Due diligence item Due diligence response Rating
Can the brand be leveraged to enter new markets or to resist 4
economic downturns?
Are a formal custodianship and an organization established to
protect the brand?
Can the brand be marketed globally?

Business condition
Due diligence item Due diligence response Rating
What is the current cost of entry into the industry? Is this cost 2
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?

Prospects for the future

Due diligence item Due diligence response Rating
What is the industry outlook? 1

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?

Competitive environment
Due diligence item Due diligence response Rating
How many direct and indirect competitors are there? 4

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?
Human capital
Due diligence item Due diligence response Rating
Do the company's products or services require special skills, 3
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?

Quality of assets
Due diligence item Due diligence response Rating
Real estate: Are the location and the facilities suitable for the 3
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?

Structure of purchase transaction

Due diligence item Due diligence response Rating
Will the purchase of the company be highly leveraged? 5

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?

Other risks
Due diligence item Due diligence response Rating
Is the labor unionized? 4

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 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 5.0 6.0 7.0 8.0
0 6.0 7.0 8.0
[Company Name]
Due Diligence Document List
[Date]

Date
Document list Reviewed Notes
reviewed
Financial documentation
Current annual business plan Yes 06/16/04 Formal business plan exists; includes financials, strategic direction, and resource
requirements for year
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

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