Investment Banking Education

Investment Banking due diligence Checklist

When a company plans on going public, the underwriter and its legal counsel are required to undertake a rigorous investigation of the company that intends to offer public shares. This is referred to as the "due diligence investigation."

The goal of the due diligence investigation is to understand fully the business of the company, the risks and problems facing it, and to assure the investing public that the company's registration statement is complete and accurate. The following checklist is intended to provide you with a general idea of the documents and information you will have to produce to cooperate with the underwriter and its legal counsel in its due diligence investigation.

1. Organization and Good Standing
   • The Company's minute book, including all minutes and resolutions of shareholders and directors, executive committees, and other governing groups.
   • The Company's list of shareholders and number of shares held by each.
   • Copies of agreements relating to options, voting trusts, warrants, puts, calls, subscriptions, and convertible securities.
   • A Certificate of Good Standing from the Secretary of State of the state where the Company is incorporated.
   • Copies of active status reports in the state of incorporation for the last three years.
   • A list of all states where the Company is authorized to do business and annual reports for the last three years.
   • A list of all states, provinces, or countries where the Company owns or leases property, maintains employees, or conducts business.
2. Previous Financing Efforts; Authorization for Going Public
3. Financial Information
   • The most recent unaudited statements, with comparable statements to the prior year.
   • Auditor's letters and replies for the past five years.
   • The Company's credit report, if available.
   • Any projections, capital budgets, and strategic plans.
   • Analyst reports, if available.
   • A schedule of all indebtedness and contingent liabilities.
   • A schedule of inventory.
   • A schedule of accounts receivable.
   • A schedule of accounts payable.
   • A description of depreciation and amortization methods and changes in accounting methods over the past five years.
   • Any analysis of fixed and variable expenses.
   • Any analysis of gross margins.
   • The Company's general ledger.
   • A description of the Company's internal control procedures.
4. Physical Assets
   • A schedule of fixed assets and identify location.
   • All U.C.C. filings.
   • All leases of equipment.
   • A schedule of sales and purchases of major capital equipment during last three...