Asset Purchase Agreement Checklist: Due Diligence for Mergers & Acquisition

The buying and selling of an asset is a likely occurrence at some point in the lifespan of almost every business venture. The terms are often documented in an asset purchase agreement checklist that will vary in complexity based on the nature of the asset and interested parties.

An asset purchase agreement can involve a wide range of property such as real estate, equipment, inventory, vehicles, businesses, intellectual property, art, collectibles, etc. Sometimes asset purchase agreements are in isolation and other times they are one part of a larger transaction.

Most parties — through the help of their legal counsel — execute the terms of an asset purchase with some reliance on a due diligence checklist. A good checklist keeps the parties organized and on track to accomplish all tasks necessary to close the deal. This article offers some explanation of items you might see on an asset acquisition due diligence checklist, why they’re important, and a sample checklist you can download.

Table of Contents

Why Is a Due Diligence Checklist for Asset Purchase Important?

A standard part of every asset purchase agreement should be a due diligence checklist to properly identify all items needed to successfully close the deal. You can cross these items off the list once finished during the period leading up to the closing date (and post-closing). The main benefit of an acquisition checklist is the confidence that you haven’t missed any critical steps. Other key benefits of a checklist include:

• increased organization
• helps you assess if you are on schedule to meet obligations and deadlines under the agreement
• Identifies red flags or other issues that would otherwise delay or terminate the agreement

Your stock purchase agreement closing checklist should incorporate every agreement, contract, license, disclosure, compliance item, and any other document necessary to finish the deal. Attempting to close a deal without a solid checklist in place creates the risk for important items to slip through the cracks. An incomplete or substandard checklist can jeopardize any otherwise well-intentioned transaction.

Asset Purchase Agreement Checklist

The contents of your asset purchase agreement checklist will likely vary depending on the nature of the purchased asset. For example, the requirements for a real estate acquisition will differ from the needs of a contract involving the sale of intellectual property. Generally, your checklist could include the following:

A list of every agreement related to the deal

• Letter of intent (the initial agreement between the parties – may be binding or nonbinding)
• Asset purchase agreement (the main contract)
• Brokerage agreement (i.e., a contract with anyone who procured the deal)
• Security agreement (for situations where the seller retains an interest in the asset or other property in the event of a buyer default)
• Escrow agreement (terms for handling funds and property during the process of closing the asset purchase agreement)
• Stock purchase agreement
• Employment agreements (for when the asset is a company with key personnel)
• Consulting agreements
• Noncompetition agreements
• Nondisclosure or confidentiality agreement

Agreements for assignments or assumptions of liabilities (to effect the transfer of rights and obligations related to an asset or liability)

You often see assignment and assumption contracts in the following contexts:

• leases for real property or personal property
• loans
• intellectual property transfers
• prior agreements affecting the involved asset

A list of related instruments or other legal documents

• Promissory note (repayment terms for asset purchases that are financed or paid for through installments)
• Bill of sale (a receipt for transfer of property often used for items like equipment, vehicles, inventory, etc.)
• vehicle title certificates
• UCC financing statement (document filed with Secretary of State listing creditors and security interests in assets subject to the agreement)
• Certificate of incorporation (a certification from an officer of the buyer and seller attesting to the valid organization of their entities that are party to an agreement)
• Legal opinions (lawyer certified statements that attest to the legitimacy of parts of a deal based on an agreed-upon set of facts)
• Third-party consents (usually in the context of property subject to a lease or loan agreement)

A list of exhibits to the asset purchase agreement

• A list of assumed business names, trade names, and internet domains
• A list of employees and independent contractors involved in a business acquisition
• A list of customers, clients, referrals, and other trade secrets
• Disclosures of licenses and permits the seller holds
• Disclosure of any encumbrance(s) on the asset
• Other statements to verify applicable regulatory compliance
• Insurance policies
• Warranty claims related to the asset

Financial statements (to verify the accuracy of any representations or warranties made in the asset purchase agreement)

• Balance sheet
• Income statements
• Profit and loss statements
• Accounts receivable
• Tax returns or other documentation showing tax clearance with the IRS

Organizational documents (for a business sale)

• Operating agreement
• Bylaws
• Consent resolutions
• Annual reports
• Meeting minutes

Important terms and dates for the transaction

• Purchase price of the asset
• Due diligence period
• Escrow dates
• Closing date
• Post-closing items

Asset Purchase Checklist Download

As mentioned above, every asset purchase agreement due diligence checklist will be different and require some customization to fit the unique elements of your deal. You can download our sample checklist in word or pdf to get a better sense of how this document can add value to your next transaction. Of course, this checklist is only a sample and should not be used without consulting a lawyer.

Asset purchase agreement checklist Word

Asset purchase agreement checklist PDF

Need Help with an M&A Closing Checklist

Due diligence checklists are essential to transactions in mergers & acquisitions. The attorneys at Cueto Law Group regularly assist clients in the negotiation and administration of asset purchase agreements and similar transactions. The firm values the organization and confidence a due diligence checklist can bring to every deal.

Cueto Law Group is a Miami-based, boutique law firm whose attorneys handle matters involving commercial transactions and litigation. The firm is led by international business attorney, Santiago Cueto.

If you need help during any stage of an asset purchase, do not hesitate to contact our office. We can schedule a consultation to learn more about your legal needs and how Cueto Law Group can help.