Pre-LOI Questionnaire

searcher profile

April 12, 2021

by a searcher from University of Virginia in New York, NY, USA

I created a Pre-LOI Questionnaire. I tried to make it industry agnostic. These are the questions that are usually not included in a CIM which is vital to know in order to assess a company.

I would love any feedback on the list, so we can finalize it and make it a resource for everyone to use.

http://bit.ly/pre-loi

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commentor profile
Reply by an intermediary
from University of Virginia in Metuchen, NJ 08840, USA
These could come up during some of the open ended discussions but here are a few thoughts for a checklist

1. Getting a sense for seasonality could really help with working capital planning.

2. Understanding revenue and profitability by product type during economic recessions will help with downside planning. This would be in addition to planning for growth which is already covered.

3. Platform or Technology dependence might not be a big issue for small businesses but for >$10mm revenue this could be an important one, similar to Key Manager Risk. Some businesses might have built in house tools and systems and documentation for those systems will be critical.

4. Contingent liabilities like warranties are sometimes hidden and should be discussed

5. Having a detailed list for all potential liabilities like taxes, OSHA, EPA etc. could help with a quick exercise, if the broker did not cover it already.
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Reply by a searcher
from Carnegie Mellon University in San Jose, CA, USA
Often the CIMs are quantitive heavy and similar information, if missing, can be easily collected from the broker/owner. The qualitative ones are usually hard to get and require more open-ended questions. For example, the "What are you most proud of in the business" question brings out the core values, strengths, and competitive advantages. Sometimes it gets hard to stop the seller when they start talking about it! Not only that, occasionally the discussion automatically lead to the weaknesses of the business - after they boast about the great stuff in the business (which is rarely financials) they talk about the improvements areas to balance it out or at least do not hesitate when asked!
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