Due-Diligence Reviews

Corporate Finance Advisors performs thorough, objective reviews of prospective deals, with an emphasis on identifying risks that might lead to economic losses or managerial headaches after the close. Even more important, we show you how to alter the terms of the deal to protect against these risks.

A typical due-diligence review identifies and explains risks related to:

  • Management
  • Sales personnel
  • Book of business
  • Growth, client retention and concentration
  • Carriers
  • Accounting
  • Computer and phone systems
  • Legal issues

We also look at special issues such as producer vesting, joint venture agreements, and contracts that might limit ownership and competition rights going forward. In each area, we suggest remedies to minimize or eliminate the risks either through changes in the purchase agreement, deal structure or post close integration plans. And unlike many advisors, we remain actively involved through the entire deal process to ensure that solutions to protect you against identified risks are reflected in the final deal terms, deal documents, working capital true up and your funds flow process.

Each report includes a section that addresses specific questions posed by the buyer. We also work with the buyer’s advisors, senior management and legal counsel to review the risks we’ve identified and our recommendations.


Detailed Outline of Due-Diligence Report


Management Risks and Issues

  • Integration between target’s and seller’s corporate cultures
  • Reliance on key executives and suggestions on limiting post close
  • Reputation among key carriers
  • Reputation of seller in marketplace

Sales Personnel Risks and Issues

  • Ability to integrate with buyer’s corporate culture
  • Concentration of production
  • Ownership of books by producers
  • Deferred compensation exposures
  • Ability to hire, train, and develop new producers
  • Compensation issues vs. industry norms and buyer’s own policies
  • Tenure of producers
  • Non-competition and non-solicitation protections
  • Track record in retaining producers and dealing with departed producers

Book of Business Risks and Issues

  • Suitability with buyer’s client base
  • Concentration risk
  • Market segmentation risk
  • Risks associated with line of business
  • Attrition rates
  • Growth rates
  • Stability of largest accounts

Carrier Risks and Issues

  • Service reputation and fit with expectations of buyer
  • Product suitability with client base of buyer
  • Concentration risk
  • Quality of markets
  • Commission rate risks and exposures
  • Contingent-income risks
  • Ability to assign carrier contracts

Accounting Risks and Issues

  • Fiduciary exposures and method of protection for buyer
  • Receivable and collection policy
  • Revenue and expense recognition polices
  • Review of working capital position and trust position
  • Review historical, projected and pro-forma income statements
  • Analysis of internal accounting system and process

Computer and Phone System Risks and Issues

  • Level of proprietary systems and need for ongoing support
  • Disaster recovery protocols and exposures
  • Upgrading requirements to fit with buyer’s internal systems

Legal Issues

  • E&O risks and experience
  • Non–E&O experience and expected exposures

Special Issues

  • Terms of servicing agreements
  • Analysis of rates charged under servicing agreement
  • Analysis of marginal profit of significant client relationships
  • Option or other shareholder agreements and impact on transaction
  • Security interest issues