Michael Kane (Boral Ret.): M&A Due Diligence Checklist

Michael Kane Boral

September 15, 2021

Michael Kane (Boral Ret.): M&A Due Diligence Checklist

Michael Kane (Boral Ret.) gives an overview of what M&A due diligence must include.

What Is Due Diligence?

Michael Kane (Ret.) says due diligence is a series of business appraisal steps that a potential buyer or investor takes to fully view the selling business and ownership risks before buying the company. As an investor, you check the business projections and understand its model, business operations, customer service, employees’ skills, etc. Your lawyer will dig deeper into the company’s profitability potential to ensure that M&A’s price is correct.

Here are some things to consider as your due diligence checklist.

1. Corporate structure

According to Michael Kane Boral, your lawyers will comb through the corporate structure, organizational documents, and other essential records. These documents include:

  • Documents for incorporation
  • Organizational chart
  • Corporate bylaws
  • Stock option plans and agreements
  • Securities holders list
  • Stockholder and voting agreements
  • Stock appreciation rights plans and related grants
  • Warranties
  • Documents for recapitalization or restructuring
  • All board minutes, including shareholder and executive committee meetings since charter
  • Any business sale or purchase agreements

2. Taxes

Michael Kane Boral adds that your attorneys will also consider tax due diligence, reviewing past income tax liabilities and analyzing any tax carryforwards. These records are essential:

  • The selling business’s tax returns filed in the last five years, such as federal, state, local, sales, and foreign income
  • Government audits
  • Any foreign, federal, state, or local taxing authority notice or correspondence
  • Net operating losses or credit carryforwards
  • Tax sharing and transfer pricing agreements
  • IRS or other tax authorities’ settlement documents
  • IRS Form 5500 for 401(k) plans.

3. Intellectual Property

Michael Kane Boral says you’ll also look at the intellectual property of M&A. Your attorneys will assess:

  • Patents
  • Trade secrets
  • Trademarks
  • Copyrights
  • Domain names
  • Licenses and licensing agreements
  • Liens or encumbrances on the company’s intellectual property
  • IP litigation and claims

4. Contracts

M&A due diligence also covers material commitments and contracts, says Michael Kane (Ret.). The following agreements are critical:

  • Customer and supplier contracts
  • Equipment leases
  • Franchising contracts
  • Accounts receivable and payable schedule
  • Settlement agreements
  • Guaranties, loans, and credit agreements
  • Partnership or joint venture agreements
  • License agreements
  • Non-compete, most favored nation, and exclusivity agreements
  • Employment agreements
  • Dealer, distribution, sales agency, or advertising agreements

5. Material Assets

According to Michael Kane Boral, material assets involve evaluating assets and liabilities or debt against them. Your lawyers will appraise the assets below.

  • Inventory stock
  • Technology
  • Equipment
  • Real estate
  • Research and development

6. Strategic Fit

Another crucial element is considering whether the business you want to buy fits your overall business strategic objective, Michael Kane (Ret.) says. For example, what’s the corporate culture like?

7. Compliance and Regulatory Issues

Your legal team will also assess the proposed transaction’s antitrust implications. Does the deal meet compliance and regulatory aspects?

8. Litigation

Another significant issue to look out for in the M&A due diligence checklist is litigation, as Michael Kane explains. Litigation involves checking if the transaction has any legal liabilities.

9. Employees and Management

Michael Kane (Ret.) also explains that reviewing employee contracts, including policies and benefits, is crucial to understanding the company’s value. As a buyer, you want to know the staff likely to remain with you after M&A.

Michael Kane (Ret.) is an executive with over 47 years of experience running multiple global building products and material businesses. Michael Kane (Ret.) has steered startup companies to success, including cement, polymer, roofing, gypsum, asphalt, insulation, sidings, and more. His manufacturing and sales team leadership has spread to North America, Europe, the Middle East, Latin America, Australia, and Asia/Pacific.

Currently, Michael Kane Boral is in retirement.