DUE DILIGENCE


ExploConsult provides Due Diligence services when you're in the process of buying an explosive or blasting business.  

As you begin evaluating the explosive or blasting businesses for sale, ExploConsult can independently verify the values and examine the status of the following items:

Inventory. Inventory refers to all explosives products and materials on hand for resale to or use.  ExploConsult should be present at any inventory valuation proceeding and determine what's on hand at present, how long it's been there, and what was on hand at the end of the last fiscal year and the one preceding that. What condition is the inventory in? Is it salable? Are you interested in selling it? Inventory valuation is usually subject to negotiation.

Plant Production equipment, bulk equipment, other equipment and buildings. ExploConsult will determine its present condition, market value when purchased, present market value, and whether the equipment was purchased or leased. Find out how much the seller has invested in leasehold improvements and maintenance to keep the facility in good condition. 

Safety, Health and Environmental. ExploConsult will conduct a Safety, Health and Environmental audit. The major concentrations will be on operations, explosives materials and raw materials to produce explosives, as well as logistics operations. Additional environmental experts will be tasked to evaluate environments conditions of soil and ground water and compliance records.  

DOT, ATF, MSHA and OSHA. ExploConsult will conduct a compliance audit and uncover any deficiencies. 

Copies of all contracts and legal documents. These include leases, purchase agreements, distribution agreements, subcontractor agreements, sales contracts, union contracts, business employee agreements, and any other legal documents concerning the business, such as fictitious business name statements, articles of incorporation, registered trademarks, copyrights and patents. For any leases (equipment, office space, etc.), find out whether they're transferable and whether the lessor's permission is necessary to assign the lease.
‚ÄčIf the business you're considering has valuable intellectual property such as a trade name, patent, or trade secret, make sure to consult
with an attorney who specializes in intellectual property.

Tax return. ExploConsult will make sure you have access to the previous five years' returns. Many business owners make use of the business for personal needs. They may buy products they personally use and charge them to the business or take vacations through the company, go to trade shows with their spouses, and so on. You and your CPA may have to read between the lines to determine the actual net worth of the company.

Financial statement. ExploConsult will the financial statements for the past five years to determine the earning power of the business. Examine the sales and operating ratios with your CPA familiar with this type of business. 

Sales records. Although sales will be logged in the financial statements, ExploConsult will take a careful look at the monthly sales records for at least the past 36 months. What you're interested in is the pattern of sales.

Complete list of liabilities. ExploConsult will examine the list of liabilities and determine the potential costs and legal ramifications. These may be items like lawsuits, liens by creditors against assets, or the use of assets such as capital equipment or receivables as collateral to secure short-term loans. Your CPA should also be on the lookout for unrecorded liabilities, such as employee benefit claims and out-of-court settlements.

All accounts receivable. ExploConsult will break these down by 30, 60, 90 days and more than 90 days. Checking the age of receivables is important because the longer they're outstanding, the lower the value of the account. All accounts payable. Like accounts receivable, accounts payable should be broken down by 30, 60, 90 days and more than 90 days to determine how well cash flows through the company. For payables older than 90 days, check to see if any creditors have placed liens on the company's assets.

Debt disclosure. ExploConsult will examine will work with your attorney to uncover debts, and his includes all outstanding notes, loans,
and any other debt to which the business has agreed. Are any business investments on the books that may have taken place outside of
the normal area? Any loans made to customers?

Marketing strategies. ExploConsult will examine how does the business solicit customers? Are discounts offered? What PR campaigns are carried out? Is there aggressive advertising? 

Advertising costs. ExploConsult will examine will analyze costs to see if they came in as budgeted and scrutinize the results of the advertising. Did sales go up? Foot traffic increase? If not, find out why.

Prices. Evaluate current price lists and discount schedules of all products, the date of the last price increases, and the percentage of increase. Determine when you're likely to be able to raise prices again. Compare what you see in this business to standards in the industry.

Industry and market history. ExploConslt will analyze the industry as well as the specific market segments the business targets to evaluate the business' profit potential. Determine whether sales in the industry, as well as those in the business' market, are growing, declining, or remaining stagnant.

Location and market area. ExploConsult will conduct a thorough analysis of the business' location, taking into account the surrounding trading areas' demographics, the general economic outlook, and the business' nearby competition. See if there are any difficulties with receiving products from vendors or delivering products to markets.

The business's reputation. ExploConsult will examine how is the business perceived by customers as well as suppliers? Image is extremely important and can be an asset or a liability. Interview customers, suppliers, the bank and owners of other businesses in the area to gather information about the reputation of the business.

Seller-customer ties. ExploConsult will examine if any customers related or connected in a special way to the present owner? How long has such an account been with the company? What percentage of the company's business is accounted for by this particular customer or set of customers? Will this customer continue to purchase from the company if ownership changes?

Salaries. Make sure salaries are realistic and consistent with industry and market standards.

List of current employees and organizational chart. ExploConsult will examine who's who in the business, who reports to whom, and who's been earning what for how long. Key personnel are an especially valuable asset. Get an understanding of the management practices of the company. Examine any management-employee contracts that exist aside from a union agreement, as well as details of employee benefit plans; profit-sharing; health, life and accident insurance; vacation policies; personnel policies; and any employee-related lawsuits against the company.

‚ÄčInsurance. ExploConsult will examine the insurance coverage the company has, who the underwriter and local company representative are, and how much premiums cost. Some businesses are underinsured and operating under potentially disastrous situations in case of fire or other catastrophe.