Diligence

What Investors and Buyers Look For

• Corporate Records: Charter, bylaws, stock ledger, board and stockholder consents, and up-to-date good standing certificates.
• Capitalization: Accurate cap table, stock option plan approvals, 409A valuations, and compliance with securities laws.
• Intellectual Property: Assignment agreements from founders and employees, registrations (trademarks, patents, copyrights), licenses, and open-source use.
• Material Agreements: Financing documents, leases, customer and supplier contracts, joint ventures, and related-party arrangements.
• Employment & Benefits: Offer letters, confidentiality/IP agreements, classification (employee vs. contractor), and benefit plans.
• Litigation & Compliance: Pending disputes, regulatory licenses, audits, or enforcement actions.
• Financials & Taxes: Historical financial statements, debt instruments, tax returns, and any outstanding liabilities.

Why Preparation Matters

• Saves Time: Instead of scrambling to locate documents, everything is already in order.
• Minimizes Risk: Incomplete or inconsistent records can delay or even derail a deal.
• Increases Leverage: Well-prepared companies project professionalism and reduce excuses for investors to re-trade terms.
• Smooths Negotiations: Disclosure schedules are easier to draft when records are already organized.

Building a Diligence-Ready Company

We work with founders to:

• Organize corporate and equity records into a clean “minute book.”
• Review and standardize contracts with customers, vendors, and employees.
• Ensure IP assignments and registrations are properly documented.
• Identify and resolve gaps—like missing board consents, unsigned PIIAs, or outdated policies.
• Prepare disclosure schedules that align with reps and warranties in financing or M&A agreements.

‍When should I start preparing for diligence?
As early as possible. The same records investors want are also needed for governance and compliance. Early organization pays off later.

What’s the difference between diligence for a financing and for an acquisition?
Financing diligence focuses on equity, governance, and IP. Acquisition diligence goes deeper into liabilities, contracts, and compliance.

What happens if my records are messy?
Investors may delay funding, lower valuations, or require additional protections. In M&A, buyers may seek price reductions or indemnities.

What are disclosure schedules, and why do they matter?
Disclosure schedules list exceptions to your reps and warranties in a purchase agreement. They protect you from breach claims if they’re complete and accurate.

Can I just fix issues during diligence?
Some issues (like missing IP assignments or botched equity grants) can be fixed, but the later you wait, the more expensive and risky cleanup becomes.