Deal Structuring Questions to Ask the Seller

Here is a sample email template I use to gather information to pre-qualify my deals. This is written to the effect as if you are speaking with a broker/agent.

Questions to ask seller/broker

Some basic pre-due diligence questions before knocking out the heads of terms,

Dear sir

To give us a better understanding of the company and it’s standing, we would be obliged if you could answer a few questions. This will help us establish if we will be a good fit to work together.

Concluding your answers we will look with a view to issue an LOI and enter an exclusivity period where we will instruct our legal team to carry out further in-depth due diligence.

Is the seller looking to retire or move on to the next venture once he / she resigns?

Is the seller looking to invest into another project upon retirement?

How motivated is the seller to resign from his / her position?

Is the business cash flow positive?

What are the total secured / unsecured debts?

What is the annual turnover (last 3 years)?

What is the profit/loss (last 3 years)?

Please provide the profit/loss statement and balance sheet for the last 3 years.

What are the companies current tangible assets?

Do any of the assets have any financial charges against them?

What is the outstanding debtor book value?

How much is currently held in stock/inventory?

Does the business lease or own its premises?

How much does the director pay themselves annually?

What is the role of the director?

How many staff work for the company?

Is the owner open to seller finance / deferred payments?

What is the current credit score of the company?

Does the business have an overdraft limit? If so what is it?

What is the burn rate of the company? (It’s monthly break-even figure after expenses are paid, the monthly cost of sales)

Are all companies tax affairs in order?

What is the current relationship like with the companies bank?

Has the company and or its directors ever been subject to any legal or insolvency proceedings?

I look forward to hearing back from you by return.

All the best

Ken Mack