#33 BUSINESS ACQUISITION FINANCING Buyer Checklist You Need To Know Before You Spend Your Money. 60 Buyer-Beware Intelligence Points.

Legal Information Notice: This checklist provides general educational information only. It is not legal advice, does not create an attorney-client relationship, and may not apply to your jurisdiction or circumstances. Laws and deadlines vary. Do not rely on this checklist for a specific legal decision or deadline; consult a qualified attorney licensed in the relevant jurisdiction.

1. You are financing a business—not merely buying its assets.
2. Historical profits may not continue.
3. Seller-adjusted earnings require verification.
4. “Add-backs” can be overly optimistic.
5. Customer concentration can create hidden risk.
6. Key employees may leave after acquisition.
7. The seller may be critical to operations.
8. Customer relationships may not transfer.
9. Contracts may not transfer.
10. Licenses may not transfer.
11. Lease terms may change.
12. Hidden liabilities can survive the transaction depending on structure.
13. Working-capital requirements can be underestimated.
14. Inventory can be overstated.
15. Accounts receivable may not be collectible.
16. Equipment may require replacement.
17. Deferred maintenance can become your problem.
18. Tax liabilities must be investigated.
19. Litigation must be investigated.
20. Debt service can consume the cash flow you expected to receive.
21. Seller financing terms can complicate the capital structure.
22. Earnouts can create disputes.
23. Overpaying can make even a good business a bad investment.
24. A financing approval does not prove the acquisition is economically sound.
25. The most dangerous assumption is “The business has always made this much money, so it will continue to do so.”

B. PREMIUM BUYER CHECKLIST

BUSINESS QUALITY

☐ Revenue history
☐ Gross margin
☐ EBITDA/SDE
☐ Cash flow
☐ Customer concentration
☐ Supplier concentration
☐ Recurring revenue
☐ Churn
☐ Competitive position

FINANCIAL VERIFICATION

☐ Tax returns
☐ Bank statements
☐ Financial statements
☐ General ledger
☐ Accounts receivable
☐ Accounts payable
☐ Inventory
☐ Payroll
☐ Owner compensation
☐ Add-backs

LEGAL

☐ Entity structure
☐ Contracts
☐ Leases
☐ Licenses
☐ Litigation
☐ Regulatory obligations
☐ Intellectual property
☐ Employee agreements

FINANCING

☐ Purchase price
☐ Buyer equity
☐ Senior debt
☐ Seller financing
☐ Earnout
☐ Interest
☐ Amortization
☐ Guarantees
☐ Covenants
☐ Working-capital requirement

TRANSITION

☐ Seller transition period
☐ Employee retention
☐ Customer retention
☐ Supplier continuity
☐ Systems transfer
☐ Password/data transfer
☐ Insurance transfer
☐ Licenses

FINAL TEST

Calculate the acquisition using:

☐ Seller’s projections
☐ Your conservative projections
☐ 20% lower revenue
☐ Higher expenses
☐ Loss of largest customer
☐ Seller departure

FINAL QUESTION

Would I still buy this business if revenue fell 20% immediately after closing?