THE AMA HANDBOOK OF DUE DILIGENCE

This is a complete list of the nearly-400 ready-to-use forms you ll find in The AMA Handbook of Due Diligence, the most exhaustive guide available on how to properly perform a due dilgence investigation and radically improve the success rate of a pending merger or acquisition. The new edition of this longtrusted resource includes a CD-ROM for quick access to all of the forms and templates for recording and analyzing every possible operational or financial activity at any organization. For more information go to: COMPLETE LIST OF FORMS, CHECKLISTS, AND OTHER DOCUMENTS *Note: all forms in this book are available as customizable Word documents. They are on the CD provided at the back of the book. Section 3: Overview of Entity 3-01. Background Information On Entity 3-02. Financial Summary Section 4: Compatibility With Investment/Acquisition Objectives 4-01. Compatibility With Investment/Acquisition Objectives 4-02. Compatibility With Investment/Acquisition Criteria 4-03. Potential Impact Of External Factors 4-04. Potential Benefits From Acquisition 4-05. Potential Impact Of Locational Factors On A Prospective Investment 4-06. Characteristics You May Wish To Avoid 4-07. Why Is The Entity Available? 4-08. Comparison With Other Potential Investment/Acquisition Candidates Section 5: Capitalization And Ownership 5-01. Summary Of Capitalization 5-02. Capitalization Common Stock 5-03. Common Stock Miscellaneous Information 5-04. Common Stock Dividend Record 5-05. Common Stock Price And Trading Volume 5-06. Common Stock Holders Of More Than Four Percent Of Shares 5-07. Capitalization Preferred Stock 5-08. Preferred Stock Dividend Record 5-09. Capitalization Bonds 5-10. Bond Yields And Major Bond Holders Section 6: Organization And Management 6-01. Board Of Directors 6-02. Board Of Directors Other Affiliations And Compensation 6-03. Board Of Directors Current And Prospective Security Holdings 6-04. Corporate Organization 6-05. Corporate Management Resumes 6-06. Recent Compensation History Of Corporate Management Personnel 6-07. Company Security Holdings Of Corporate Management Personnel 6-08. Organization And Management Information Requests 6-09. Board Of Directors Opinions Of Management 6-10. Board Members Apparent Position Regarding Potential Acquisition 6-11. Overall Management Assessment 6-12. Assessment Of Individual Management Personnel Section 7: Relationships With Outside Organizations 7-01. Relationships With Accounting Firms 7-02. Relationships With Law Firms 7-03. Relationships With Commercial Banks 1

7-04. Relationships With Investment Banks 7-05. Relationships With Venture Capital Firms 7-06. Relationships With Private Investors And/Or Investment Groups 7-07. Relationships With Consulting Firms 7-08. Relationships With Trade Associations 7-09. Relationships With Other Professional Organizations 7-10. Outside Organization Information Request Section 8: Description of Products And/Or Services 8-01. Summary Of Product Lines/Services 8-02. Individual Product Line/Service Overview 8-03. Competitive Product/Service Analysis 8-04. Product Line Positioning 8-05. Identified Product And Service Improvement Projects 8-06. Potential Future Product And Service Improvement Opportunities 8-07. Recently Discontinued Products And/Or Services; Products And/Or Services Potentially Subject To Early Termination 8-08. New Product And/Or New Service Development Projects 8-09. New Product Development Summary Of Current Projects 8-10. Schedule Of Expenditures For Approved Development Projects 8-11. Performance On Past Development Projects 8-12. Distribution Of Company Development Funds 8-13. Source Of Total Development Funds 8-14. Trend In Development Expenditures, Salaries And Staffing Levels; Comparison Of Budget Versus Actual Expenditures 8-15. Comparison Of Development Expenditures With Other Companies 8-16. Current Development Budget Considerations 8-17. Future Development Requirements 8-18. Accounting For Development Expenditures 8-19. Development Organization 8-20. Development Organization Resumes Of Key Personnel 8-21. Compensation Of Key Development Personnel 8-22. Development Staffing Levels 8-23. Trend In Development Staffing 8-24. Internal Development Procedures 8-25. Current Product/Service Information Request 8-26. New Product/Service Development Information Request 8-27. Summary Of Major Development Strengths And Weaknesses 8-28. Potential Impact Of An Acquisition On The Development Organizations Section 9: Revenues And Market Share 9-01. Trend In Total Revenues All Products And/Or Services 9-02. Trend in Revenues By Product Line Or Service 9-03. Trend In Market Share By Individual Product Line Or Service 9-04. Revenues By Major Customer 9-05. Trend In Revenues By Customer 9-06. Revenues By Channel Of Distribution 9-07. Revenues By Distribution Channel Direct Sales To Customers, Retailers 9-08. Revenues By Distribution Channel Direct Sales To Industry, Government 9-09. Revenues By Distribution Channel Sales Through Wholesale Offices, Distributors 9-10. Revenues By Distribution Channel Through Sales Representatives, Other Channels 9-11. Revenues By Geographic Region 9-12. Trend In Revenues By Geographic Region 9-13. Trend In Revenues By Month 9-14. Seasonal Variation In Revenues 2

9-15. Trend In Revenues From Commercial Negotiated Contracts 9-16. Commercial Negotiated Contracts 9-17. Commercial Negotiated Contracts Renegotiation Experience; Status Of Current Renegotiations 9-18. Trend In Revenues From Government Contracts 9-19. Government Contracts 9-20. Government Contracts Renegotiation Experience; Status of Current Negotiations 9-21. Trend In Revenues Generated Through Independent Distributors; Ten Largest Independent Distributors 9-22. Trend In Revenues Generated By Independent Sales Representatives; Ten Largest Independent Sales Representatives 9-23. Summary of Factors Impacting Market Share 9-24. Backlog By Product Line Or Service 9-25. Book-To-Ship Ratio 9-26. Schedule of Deliverable Backlog 9-27. Lost Sales; Current or Potential Problem Customers 9-28. Revenue Information Request 9-29. Potential Revenue Improvement Opportunities 9-30. Potential Impact Of An Acquisition On The Combined Revenues Section 10. Marketing Operations 10-01. Marketing Organization 10-02. Marketing Organization Resumes Of Key Marketing Personnel 10-03. Compensation Of Key Marketing Staff Personnel 10-04. Qualification, Recruiting And Training Of Direct Sales Personnel 10-05. Compensation Of Direct Sales Personnel 10-06. Marketing Organization Expense Accounts 10-07. Marketing Locations And Facilities Domestic 10-08. Marketing Locations And Facilities Foreign 10-09. Marketing Channels 10-10. Distribution Channels Characteristics Of Present System 10-11. Distribution Channels Miscellaneous Questions 10-12. Market Planning And Research Organization And Activities 10-13. Market Planning And Research Methodology And Expenditures 10-14. Advertising Organization And Activities 10-15. Advertising Media And Expenditures 10-16. Comparison Of Advertising Programs With Major Competitors 10-17. Sales Promotion Organization And Activities 10-18. Trade Show Participation 10-19. Sales Promotion Expense 10-20. Comparison Of Sales Promotion Programs With Major Competitors 10-21. Foreign Marketing Considerations 10-22. Summary Of Franchise Operations Entity As Franchiser 10-23. Summary Of Franchise Operations Entity As Franchisee 10-24. Factors Impacting Marketing Activities 10-25. Pricing Organization 10-26. Internal Pricing Policies 10-27. Special Pricing Solutions 10-28. Price Trends 10-29. Current Pricing Environment 10-30. Terms Of Sale And Credit Policies 10-31. Terms Of Sale Product Warranty And Return Policies 10-32. Terms Of Sale Competitive Environment 10-33. Product Leasing Programs 10-34. Other Marketing Programs 10-35. Marketing Financial Performance 3

10-36. Marketing Performance Versus Budget 10-37. Marketing Information Request 10-38. Summary Of Observations Regarding Marketing Activities 10-39. Third Party Comments Regarding Marketing Activities 10-40. Summary Of Major Marketing Strengths And Weaknesses 10-41. Potential Impact Of An Acquisition On Marketing Organizations 10-42. Potential Impact Of An Acquisition On Outside Marketing Firms Section 11: Customer Service 11-01: Customer Service Organization 11-02. Resumes Of Key Customer Service Personnel 11-03. Compensation Of Key Customer Service Personnel 11-04. Customer Service Locations 11-05. Trend In Customer Service Staffing; Customer Service Financial Performance 11-06. Customer Service Activities 11-07. Quality Of Customer Service 11-08. Profitability Of Service And Repair Operations Section 12: Inventory Control And Purchasing 12-01. Inventory Control Organization 12-02. Resumes Of Key Inventory Control Personnel 12-03. Compensation Of Key Inventory Control Personnel 12-04. Inventory Control Activities 12-05. Trend In Inventory Control Staffing; Inventory Control Financial Performance 12-06. Purchasing Organization 12-07. Resumes Of Key Purchasing Personnel 12-08. Compensation Of Key Purchasing Personnel 12-09. Purchasing Activities 12-10. Availability Of Materials And Supplies 12-11. Identification Of Critical Materials And Supplies 12-12. Price Trends For Purchased Materials And Supplies 12-13. Characteristics Of Major Suppliers 12-14. Summary Of Largest Outstanding Purchase Orders 12-15. Summary Of Largest Outstanding Purchase Contracts 12-16. Purchasing Policies And Procedures 12-17. Trend In Purchasing Staffing; Purchasing Department Financial Performance 12-18. Inventory Control And Purchasing Information Request 12-19. Summary Of Observations Of Inventory Control And Purchasing Activities 12-20. Notes Regarding Observations Of Inventory Control Activities 12-21. Notes Regarding Observations Of Purchasing Activities 12-22. Potential Impact Of An Acquisition On Inventory Control Organizations 12-23. Potential Impact Of An Acquisition On Purchasing Organizations Section 13: Production 13-01. Production Organization 13-02. Resumes Of Key Production Personnel 13-03. Compensation Of Key Production Personnel 13-04. Production Methods And Processes 13-05. Production Facilities 13-06. Production Equipment 13-07. Future Production Equipment Requirements 13-08. Surplus Production Equipment 13-09. Trend In Production Equipment Acquisitions And Accounting Policies With Respect To Major Equipment Items 4

13-10. Production Tooling 13-11. Production Capacity And Utilization; Potential Impediments To Nearby Expansion 13-12. Production Planning And Control 13-13. Quality Control 13-14. Stockroom Operations 13-15. Production Training Programs 13-16. Production Cost Accounting 13-17. Intra-Company Material Transactions 13-18. Subcontracting To Others 13-19. Plant Safety 13-20. Utility Services 13-21. Plant Maintenance 13-22. Trend In Production Staffing 13-23. Production Department Financial Performance 13-24. Trend In Production Productivity 13-25. Competitive Production Environment 13-26. Production Information Request 13-27. Summary Of Observations Regarding Production Activities 13-28. Summary Of Major Production Strengths And Weaknesses 13-29. Potential Impact Of An Acquisition On Production Organization Section 14: Physical Distribution 14-01. Physical Distribution Organization 14-02. Resumes Of Key Distribution Personnel 14-03. Compensation Of Key Distribution Personnel 14-04. Physical Distribution Activities 14-05. Warehouse Facilities 14-06. Major Distribution Equipment 14-07. Trend In Distribution Equipment Acquisitions; Accounting Policies With Respect To Major Equipment Items 14-08. Trend In Distribution Staffing; Distribution Financial Performance 14-09. Distribution Of Outbound Transportation By Type Of Carrier; Competitive Distribution Environment 14-10. Distribution Information Request 14-11. Summary Of Observations Regarding Distribution Activities 14-12. Summary Of Observations Regarding Distribution Activities Notes 14-13. Summary Of Major Distribution Strengths And Weaknesses 14-14. Potential Impact Of An Acquisition On The Distribution Organization Section 15: Computer, Communications And Information Systems 15-01. Organization Of Computer, Communications And Information Systems 15-02. Resumes Of Key Computer, Communications And Information Systems Personnel 15-03. Compensation Of Key Computer, Communications And Information Systems Personnel 15-04. Computer Applications 15-05. Outside Computer Services 15-06. Planned New Computer Applications 15-07. Computer Inventory 15-08. Communications Applications 15-09. Major Communications Equipment Other Than Regular Telephones 15-10. Integrated Computer/Communications Systems 15-11. Information Systems 15-12. Integrated Computer/Communications/Information Systems 15-13. Trend In Computer/Communications/Information Systems Staffing 15-14. Trend In Computer/Communications/Information Systems Expenses 15-15. Competitive Computer/Communications/Information Systems Environment 5

15-16. Computer/Communications/Information Systems Information Request 15-17. Summary Of Observations Regarding Computer/Communications/Information Systems 15-18. Summary Of Computer/Communications/Information Systems Strengths And Weaknesses 15-19. Impact Of An Acquisition On The C. C. & I. Organization Section 16: Financial Management 16-01. Financial Organization 16-02. Resumes Of Key Financial Personnel 16-03. Compensation Of Key Financial Personnel 16-04. Accounting Policies And Procedures 16-05. Financial Controls 16-06. Foreign Exchange Transactions 16-07. Internal Audit Function 16-08. Financial Planning And Budgeting 16-09. Financial Reporting 16-10. Financial Activities 16-11. Investor Relations 16-12. Investment Management 16-13. Insurance Management 16-14. Tax Management 16-15. Trend In Finance Department Staffing 16-16. Trend In Finance Department Expenses 16-17. Financial Operations Information Request 16-18. Summary Of Observations Regarding Financial Operations 16-19. Summary Of Financial Strengths And Weaknesses 16-20. Potential Impact Of An Acquisition On The Finance Organization Section 17: Legal Affairs 17-01. Legal Organization; Compensation Of Key Legal Personnel 17-02. Resumes Of Key Legal Personnel 17-03. Legal Department Activities 17-04. Litigation Summary Entity Is Plaintiff 17-05. Litigation Summary Entity Is Defendant 17-06. Potential Litigation Entity Is Plaintiff 17-07. Potential Litigation Entity Is Defendant 17-08. Recently Concluded Litigation Entity Was Plaintiff 17-09. Recently Concluded Litigation Entity Was Defendant 17-10. Patents, Copyrights And Trademarks 17-11. Licensing Agreements 17-12. Regulatory Affairs 17-13. Regulatory Compliance Actions 17-14. Officers And Directors Background Information 17-15. Trend In Legal Department Staffing; Outside Legal Services 17-16. Trend In Legal Department Expenses 17-17. Legal Activities Information Request 17-18. Summary Of Observations Regarding Legal Activities 17-19. Summary Of Major Legal Strengths And Weaknesses 17-20. Potential Impact Of An Acquisition On The Legal Organization Section 18: Security And Safety 18-01. Security Organization; Safety Organization 18-02. Potential Security Problems 18-03. Potential Safety Problems 18-04. Other Security/Safety Matters 6

Section 19: Human Resources 19-01. Human Resources Organization; Compensation Of Key Human Resources Personnel 19-02. Resumes Of Key Human Resources Personnel 19-03. Trend In Human Resources Department Staffing; Outside Services 19-04. Trend In Human Resources Department Expenses 19-05. Distribution Of Personnel By Various Categories 19-06. Benefit Plans For Active Personnel 19-07. Retirement Benefits Pension Plans 19-08. Retirement Benefits Other Than Pension Plans 19-09. Basic Wage And Salary Factors 19-10. Incentive Programs 19-11. Perquisites; Reimbursement For Relocation Expenses 19-12. Employment Contracts 19-13. Organized Labor Agreements 19-14. Labor-Management Relations 19-15. Hiring Policies And Procedures 19-16. Termination Policies; Termination Benefits 19-17. Training Programs 19-18. Local Labor Environment 19-19. Human Resources Information Request 19-20. Summary Of Observations Regarding Human Resources Activities 19-21. Summary Of Major Human Resources Strengths And Weaknesses 19-22. Potential Impact Of An Acquisition On The Human Resources Organization 19-23. Potential Cost Of Integrating Human Resources Policies 19-24. Estimated Personnel Relocation Expenses Section 20: Land And Buildings 20-01. Summary Of Active Domestic Facilities 20-02. Summary Of Active Foreign Facilities 20-03. Physical Characteristics Of Active Facilities 20-04. Financial Characteristics Of Owned Facilities 20-05. Financial Characteristics Of Leased Facilities 20-06. Miscellaneous Facility Characteristics 20-07. Factors Potentially Impacting The Future Value Of Existing Facilities 20-08. Production Capacity And Potential Modifications To Existing Facilities 20-09. Summary Of Currently Inactive Facilities; Potential Retirement Of Currently Active Facilities 20-10. Summary Of Undeveloped Land; Trend In Real Property Taxes 20-11. Potential Acquisition Of New Facilities 20-12. Property And Facilities Information Request Section 21: Introduction To Financial Analyses 21-01. Summary Balance Sheet As Of 21-02. Summary Income Statement For The Section 22: Balance Sheet Analysis Liabilities 22-01. Short-Term Notes Payable 22-02. Short-Term Debt Service Payments; Principal Balances Of Short-Term Debt 22-03. Payable Aging For The Twenty-Five Largest Accounts 22-04. Explanation For Overdue Payables 22-05. Accounts Payable Analysis 22-06. Trend In Unearned Revenues; Trend In Accrued Expenses 22-07. Trend In Total Current Liabilities 22-08. Long-Term Notes Payable 22-09. Features of Bond Issues 22-10. Long-Term Debt Service Payments; Principal Balances Of Long-Term Debt 7

22-11. Recent Bond Performance 22-12. Other Noncurrent Liabilities Section 23: Revenues 23-01. Trend In Gross Revenues, Revenue Reductions, And Net Revenues Section 24: Operating Expenses 24-01. Selling Expenses 24-02. Selling Expenses As A Percent Of Net Revenues 24-03. Variation In Selling Expense With Net Revenues 24-04. Comparison Of Selling Expenses As A Percent Of Net Revenues 24-05. General And Administration Expenses 24-06. General And Administration Expenses As A Percent Of Net Revenues 24-07. Variation In General And Administrative Expenses With Net Revenues 24-08. Comparison Of General And Administrative Expenses As A Percent Of Net Revenues 24-09. Allocation Of Office Occupancy And Office Equipment And Furniture Expenses 24-10. Payroll Related Expenses As A Percent Of Payroll Expenses 24-11. Comparison Of Payroll Related Expenses As A Percent Of Payroll Expenses Section 25: Income Taxes 25-01. Status Of Income Tax Filings And Audits; Provision For Income Taxes 25-02. Elements Of Deferred Taxes; Effective Tax Rate 25-03. Availability Of Net Operating Loss; Deficiency Claim Settlements 25-04. Income Tax Information Request Section 26: Net Income 26-01. Trend In Net Income; Comparison Of Profit Margin With Industry Averages And With Selected Companies Section 27: Capital Expenditures 27-01. Trend In Capital Expenditures; Comparison With Depreciation Expense And Net Revenues 27-02. Trend In Adjusted Capital Expenditures; Comparison Of Adjusted Capital Expenditures With Net Revenues Section 28: Cash Flow 28-01. Trend In Cash Flow Section 29: Financial Ratio Analysis 29-01. Profitability Ratios 29-02. Stock Performance Ratios 29-03. Liquidity Measures 29-04. Debt Ratios 29-05. Activity Ratios 29-06. Trend In Profitability Ratios 29-07. Trend In Common Stock Performance Ratios 29-08. Trend In Liquidity Measures 29-09. Trend In Debt Ratios 29-10. Trend In Activity Ratios Section 30: Income Statement Projections 30-01. Projection Of Gross And Net Revenues 30-02. Projection Of Cost Of Goods Sold And Gross Margin 30-03. Projection Of Selling Expenses 30-04. Projection Of General And Administrative Expenses 30-05. Projection Of Selling, General And Administrative Expenses 8

30-06. Projection Of Operating Income 30-07. Projection Of Other Income And Expenses 30-08. Projection Of Unusual And Infrequent Items 30-09. Projection Of Unusual, Infrequent And Extraordinary Items 30-10. Basis For Projections Of Unusual, Infrequent And Extraordinary Items 30-11. Projection Of Net Income 30-12. Comparison Of Entity s And Investigator s Projections Section 31: Balance Sheet Projections 31-01. Projection Of Current Asset Requirements 31-02. Projection Of Property, Plant And Equipment 31-03. Projection Of Other Noncurrent Assets 31-04. Projection Of Short-Term Debt 31-05. Projection Of Accounts Payable 31-06. Projection Of Unearned Revenues And Accrued Expenses 31-07. Projection Of Other Noncurrent Liabilities 31-08. Projection Of Shareholders Equity Other Than Retained Earnings 31-09. Projection Of Change In Retained Earnings 31-10. Summary Balance Sheet Form Section 32: Cash Flow Projections 32-01. Projections Of Cash Flow 32-02. Monthly Debt Service Payments On Current Short-Term Notes Payable And Current Portion of Long-Term Debt 32-03. Annual Debt Service Payments Based On Current Debt CHECKLISTS AND OTHER DOCUMENTS Section 33: Due Diligence Checklists For Acquisitions Or Investments Or Specific Dealings In Selected Industries 33-01: Restaurant Businesses 33-02: Franchising Companies 33-03. Hospitals And Health Care Facilities 33-04. Technology-Driven Companies 33-05. Outsourcing Technological Services 33-06. Private Equity And Hedge Funds 33-07. Family And Closely-Held Businesses Section 34: Transaction-Specific Due Diligence Checklists 34-01. Due Diligence Checklists For Joint Ventures/Strategic Alliances 34-02. Due Diligence Checklists For Technology Licensing Arrangement 34-03. Due Diligence Checklists For Dealership & Distributorship Arrangement Section 35: Sample Forms Related To Effective Due Diligence 35-01. Confidentiality Agreement 35-02. Investor Questionnaire In Connection With Private Placement Offerings 35-03. Officer And Director (Employee & Non-Employee) Questionnaire To Conduct Due Diligence Of Existing Board Members Prior To An Offering Or In Connection With An M&A Transaction Section 36: Due Diligence Checklists For Special Situations 36-01. Employee Benefit Plans And ERISA Matters 36-02. Hart-Scott-Rodino Questionnaire (Antitrust Compliance Filings) 36-03. Environmental Matters 36-04. Real Estate And REIT Matters 9