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Author's Note:
This report sample shows the detailed information typcialy gathered during due diligence fieldwork for a complex business/organization
and the presentation of that information for our Clients.
Information gathered in this report serves many purposes, such as financial modeling, business valuation and post-transaction integration.
NOTICE TO READER
KESPR has been engaged by [*] to perform [limited] financial due diligence on [ABC limited] and its subsidiaries.
Our report has been prepared solely for the use of the directors of [*]. This report should not be referred to, in whole or in part, or quoted by expertise or referenced in any manner, or distributed in whole or in part
or copied to any third party without our prior written consent. The scope of the work has been limited to the purpose of our engagement detailed in the engagement letter dated [DATE]
Verification
All material herein was prepared by KESPR based upon information obtained by the company or other sources believed to be reliable. The information contained herein is not guaranteed by KESPR to be
accurate, and should not be considered to be all-inclusive.
Projections
This report may contain statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934,
as amended. The words "may" "would," "will," "expect," "estimate," "anticipate," "believe," "intend," and similar expressions and variations thereof are intended to identify forward-looking statements. Readers are
cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond KESPR's ability to estimate, forecast or project, and
that actual results may differ materially from those projected in the forward-looking statements as a result of various factors.
Matters excluded
Areas that were excluded from this due diligence review includes:
- issues of law
- fixed assets and work-in-progress valuation
- intangible assset valuation
- regulatory issues
- other specialist area beyond the expertise of KESPR
You should consider whether to obtain expert advice in relation to these areas.
This report is issued on the understanding you have drawn our attention to all matters of which you are aware concerning the company’s financial position or the proposed transaction which may have an impact
on our report up to the date of signature of the finalized report.
Report Contents
I Executive Summary
Significant Findings
II Background Information
Company Description
Industry and market trends
Survey of latest economic forecast and news
IV Subsequent Events
V Financial Projections
Management's Budget
Appendices
A Legal Entities
B Management Bio
C Organizational Structure
EXECUTIVE SUMMARY
Significant Findings:
1. Going Concern
2. Banking Facilities
Background Information
COMPANY DESCRIPTION
INDUSTRY DESCRIPTION
Unemployment
Canada
Royal Bank of Canada 6.1% 8.3% 8.0% 7.2%
Bank of Montreal 6.0% 6.2% 8.3% 8.0% 7.5%
CIBC 6.0% 6.1% 8.3% 8.3% 8.1%
Average 6.0% 6.1% 8.3% 8.1% 7.6%
Median 6.0% 6.1% 8.3% 8.0% 7.5%
2007 2008 2009 2010 F 2011 F
Retail Sales
Canada
Royal Bank of Canada 3.4% -3.0% 6.5% 5.0%
Bank of Montreal
CIBC
Average 3.4% -3.0% 6.5% 5.0%
Median 3.4% -3.0% 6.5% 5.0%
2007 2008 2009 2010 F
Housing Starts
Canada
Royal Bank of Canada 212.0 149.0 189.0 185.0
Bank of Montreal 228.7 211.6 148.9 182.3 178.8
CIBC 228.0 211.0 145.0 180.0 185.0
Average 228.4 211.5 147.6 183.8 182.9
Median 228.4 211.6 148.9 182.3 185.0
2007 2008 2009 2010 F 2011 F
CPI
Canada
Royal Bank of Canada 2.4% 0.3% 1.9% 2.2%
Bank of Montreal 2.1% 2.4% 0.3% 1.8% 1.9%
CIBC 2.1% 2.4% 0.3% 2.0% 2.1%
Average 2.1% 2.4% 0.3% 1.9% 2.1%
Median 2.1% 2.4% 0.3% 1.9% 2.1%
2007 2008 2009 2010 F
Canada
United States
Other
Balance Sheet Oct 31, 2007 Oct 31, 2008 Oct 31, 2009 [DD Date]
Intangible assets
Other assets
Total Assets
Accounts receivable
Other liabilities
Debt, current portion
Common shares
Preferred shares
Retained earnings
Income Statement Oct 31, 2007 Oct 31, 2008 Oct 31, 2009 [DD Date]
Revenue
Cost of sales
Gross margin
Operating expenses
Depreciation & amortization
Operating profit
Note(s):
[Significant accounting policies]
Cash Flow Schedule Oct 31, 2007 Oct 31, 2008 Oct 31, 2009 [DD Date]
Revenue
Cost of sales
Gross margin
Operating expenses
Working capital
Realized foreign exchange losses (gains)
Cash Flow from Operations
Cash taxes
After-tax cash flow from operations
Note(s):
1. Cash flow presented on a Direct basis
Commentary:
Date 10/31/2009 4/30/2010
Notes (1)
Cash 1,000 1,254
Restricted Cash x 854
Marketable Securities 527
Total 1,000 2,636
Bank Accounts
Acct No. Institution Type Holder Location Denom Foreign Bal. C$ Bal Rates Term *
01-00545-120 BOM C ABC Limited Vancouver, BC CAD $1,000 0.75% N/A
01-00545-121 BOM S A Limited Richmond, BC CAD $150 1.25% N/A
01-00545-122 BOM S B Limited Victoria, BC USD $100 $104 1.25% N/A
$1,254
Short-term Investments
Certificate No. Institution Type Holder Location Denom Foreign Bal. C$ Bal Rates Term *
01-00545-120 RBC CD ABC Limited Vancouver, BC CAD $500 4.00% 12
01-00545-121 Merrill M A Limited Richmond, BC CAD $250 2.00% 15
01-00545-122 AIM GIC B Limited Victoria, BC USD $100 $104 3.75% 23
$854
Restricted Cash
Acct No. Institution Type Holder Location Denom Foreign Bal. C$ Bal Rates Term *
01-00545-120 RBC S A Limited Vancouver CAD $250 0.25% N/A
01-00545-121 Merrill S B Limited Vancouver CAD $150 0.25% N/A
01-00545-122 AIM S C Limited Vancouver EUR $100 $127 0.25% N/A
$527
* Term in months
Note(s):
1. As per audited financial statements
2 Balances as at DD field work date
3. Nature of restricted cash described here
4. Abbreviations:
C = Chequing
S = Savings
CP = Commercial Paper
M = Mutual Fund
GIC = Guaranteed Investment Certificates
CD = Certificate of Deposit
5. Bank Abbreviations
Abbrev Bank Name Bank Contact Telephone
BOM Bank of Montreal
RBC Royal Bank of Canada
WORKING CAPITAL
(C$ in thousands, unless otherwise indicated)
Change ($)
Quarterly Period Ended 10/31/2009 1/31/2010 4/30/2010 7/31/2010 1/31/2010 4/30/2010 7/31/2010
Current Assets
Accounts Receivable
Prepaid expenses & deposits
Inventory
Total Current Assets
Current Liabilities
Accounts Payable
Total Current Liabilities
Financial Ratios
Liquidity
Current Ratio x x x x
Acid Test Ratio x x x x
Note(s):
1. Ratio formulas:
Current Ratio (Current Assets / Current Liabilities)
Acid Test Ratio: (Current Assets -Inventory/ Current Liabilities)
Net Sales / Working Capital
Average Inventory / Working Capital
WORKING CAPITAL
(C$ in thousands, unless otherwise indicated)
Accounts Payable
Current (0-30 days) 100 100 100 100 49% 49% 49% 49%
31-60 days 30 30 30 30 15% 15% 15% 15%
61-90 days 25 25 25 25 12% 12% 12% 12%
90+ days 50 50 50 50 24% 24% 24% 24%
Total 205 205 205 205 100% 100% 100% 100%
INVENTORY
(C$ in thousands, unless otherwise indicated)
Inventory on Hand
Qty Unit Cost Cost
Category 1 Item 1
Item 2
Category 2 Item 3
Item 4
Item 5
Category 3 Item 6
Item 7
Total
Top 10 Sellers, by Revenue This Month YTD Last Year Top 10 Sellers, by Volume This Month YTD Last Year
Item 1 $ $ $ Item 1
Item 2 $ $ $ Item 2
Item 3 $ $ $ Item 3
Item 4 $ $ $ Item 4
Item 5 $ $ $ Item 5
Item 6 $ $ $ Item 6
Item 7 $ $ $ Item 7
Item 8 $ $ $ Item 8
Item 9 $ $ $ Item 9
Item 10 $ $ $ Item 10
Top 10 Total Top 10 Total
% of Total Sales % of Total Sales
FIXED ASSETS
(C$ in thousands, unless otherwise indicated)
Description Cost Acc Amort NBV Account depreciation policy Current Appraised Value
Land
Building
Plant / Factory
Leasehold Improvement
2. Equipment
Description Cost Acc Amort NBV Account depreciation policy Current Appraised Value
Equipment
Machinery
Tools
Vehicles
Description Cost Acc Amort NBV Account depreciation policy Current Appraised Value
Office lease
Equipment lease
Other lease / license etc.
Abbreviation(s):
1. NBV = Net book value
FIXED ASSETS
(C$ in thousands, unless otherwise indicated)
Listing Detail
Year of
Current
Manufacture Year Acquisition
FA Category Description Acc Amort NBV Appraised
(if Acquired Cost
Value
applicable)
Land [Address 1]
[Address 2]
Building [Address 1]
[Address 2]
Vehicles [Car 1]
[Truck 2]
Equipment [Item 1]
[Item 2]
[Item 3]
INTANGIBLE ASSETS
(C$ in thousands, unless otherwise indicated)
1. Goodwill
[Description of Goodwill and relevant history/anaysis]
2. Customer Contract(s)
Contract
Reference Contract Name Start Date End Date Extensions Key Terms
Rate
3. Lease Commitments
CONTINGENT LIABILITIES
(C$ in thousands, unless otherwise indicated)
[Plan Description]
2. Product Warranties
3. Pending Lawsuits
1. Share Capital
Common Shares
Class Par Value Voting Dividend Cumul Dvd Authorized Treasury Issued Outstanding
A
B
C
Total
Preferred Shares
Class Par Value Voting Dividend Cumul Dvd Authorized Treasury Issued Outstanding
A
B
C
Total
2. Stock Options
Grant Date Expiry Date Year(s) Number Strike Price Option Rights
Total
3. Warrants
Grant Date Expiry Date Year(s) Number Strike Price Warrant Rights
Total
Total
3. Lease Commitments
No. Institution Facility Original Terms Curr Bal Covenants
Orig. Bal. End Bal. Amort Period Interest Refinance Date
Total
[Name] Director 100000 3% Demand loan bearing interest of 3% p.a. paid annually.
REVENUE
(C$ in thousands, unless otherwise indicated)
Sales Category 2
Sales Category 2, % of Total
Sales Discussion
Sales Details
Sales Category 1
Sales Revenue
Sales Qty (units)
Sales Unit Price
Qty Growth
Unit Price Change
Customers
Customer 1
Customer 2
Customer 3
Others
Country/Location/Branch
Location 1
Location 2
Location 3
Others
Sales Category 2
Sales Category 2, % of Total
Sales Category 1
Cost of Goods Sold
Qty Sold (units)
Unit Cost
Freight, Insurance
Brokerage
Storage
Total Unit Cost
Gross Margin
Average Mark-up
Suppliers
Supplier 1
Supplier 2
Supplier 3
Others
Sales
Wages & Benefits
Advertising & Promotion
Meals & Entertainment
Telephone & Communications
Travel
Marketing
Wages & Benefits
Advertising & Promotion
Telephone & Communications
Travel
Operations
Wages & Benefits
Advertising & Promotion
Telephone & Communications
Travel
Administration
Wages & Benefits
Office
Supplies
General Insurance
Rent
Telephone & Communications
Utilities
Repair & Maintenance
Human Resources
Overview Overview
Department Head Count FTE Total Payroll Department Head Count FTE Total Payroll
Management Management
Operations Operations
Sales & Marketing Sales & Marketing
Administration Administration
Total Total
Management
Name Title Status Ann Salary Hourly Wage Benefits Total Annual Bonus Other Remuneration
[Name] President FT
[Name] CFO FT
[Name] COO FT
Total
Total
Operations
Name Title Union [Y/N] Status Ann Salary Hourly Wage Benefits Total Annual Bonus Other Remuneration
[Name] General Manager FT
[Name] Supervisor FT
[Name] Specialist FT
Total
Administration
Name Title Union [Y/N] Status Ann Salary Hourly Wage Benefits Total Annual Bonus Other Remuneration
[Name] Secretary FT
[Name] Secretary FT
[Name] Secretary PT
Total
INSURANCE
(C$ in thousands, unless otherwise indicated)
TAX
(C$ in thousands, unless otherwise indicated)
Tax Entity Country of Tax Number Corporate Tax CCPC? Loss Carry Taxes Tax Unpaid Unpaid Prior Year
Residence Relationship Juridiction Forward Unpaid Dispute? Penalties Interest Taxes
Relationship Code:
1 = Parent
2 = Subsidiary
3 = Associated
3 = Related, but not associated
2. Other Taxes
[HST]
[Payroll]
Legal Entities
ABC Limited
Board of Directors
Management Team
Organizational Structure
President/CEO
KESPR specializes in the gathering and analysis of business and financial information to facilitate business acquisitions and divestitures. This process is called
Due Diligence and is a core competency in KESPRs Transaction Services practice.
Our due diligence comprises both the commercial and financial aspects of a transaction and we participate in:
- Pre-deal evaluation
- Transaction evaluation
- Deal structuring
- Negotiations support
- Due diligence field work and findings report
Our primary role is to produce a strong negotiating position and we will work closely with your staff, legal and other advisors, becoming an integral part of your
transaction team. By helping you become aware of all the issues, you will gain the confidence to make decisions and take action.
Our commitment to the success of your acquisition extends beyond deal closing. Leveraging knowledge gained from the due diligence process, we can provide
financial and accounting support and leadership as you embark on integrating business processes and people.
Contact Details:
Phone: +1.604.723.1781
Email: info@kespr.com
www.kespr.com