Reading a deal report: what's actually inside

Once a buyer and seller agree on a price in principle for a Canadian small business acquisition, the next stage of due diligence usually produces some version of what people in the industry loosely call a 'deal report', a package of financial, operational, and legal information the buyer reviews before committing further. There is no single standard format, and what a broker or seller assembles can range from a short summary to a fairly detailed data room, but most versions cover a similar core of information.

What's typically included

• Historical financial statements, usually two to three years, plus interim statements for the current year, ideally matched against what was actually filed with the CRA and against GST/HST filings
• A normalized or 'add-back' earnings summary showing seller's discretionary earnings or EBITDA after adjusting for one-time, personal, or non-recurring items the owner ran through the business
• An asset list covering equipment, vehicles, inventory, and leasehold improvements, along with their approximate condition, age, and any liens or financing still attached to them
• Lease and key contract details, including term remaining, renewal options, and any change-of-control clauses that could be triggered by a sale
• A customer and revenue breakdown showing how concentrated revenue is among top customers, and how much is contract or recurring versus one-off
• Employee information, including headcount, key roles, wage and benefit obligations, and which staff, if any, are expected to stay on after closing
• Any liabilities, pending claims, or compliance matters relevant to the industry, such as provincial workers' compensation history or licensing status

How buyers commonly use it

A deal report is not a valuation and is not a guarantee that the numbers will hold up. It is a starting point for the buyer's own due diligence, usually done alongside an accountant and, for anything beyond a very small transaction, a lawyer. Buyers typically use it to decide whether the price they agreed to still makes sense once they can see the detail behind the headline revenue and earnings figures, and to identify follow-up questions or conditions worth including in a purchase agreement, such as a holdback tied to accounts receivable collection or a warranty about undisclosed liabilities.

The quality of a deal report also tends to say something about how organized the seller's own business is. A seller who can produce clean, reconciled financials and clear documentation quickly is often, though not always, running a business with fewer operational surprises waiting underneath. On Deavo, listings are built to surface the categories of information above where a seller or broker has made them available, but Deavo does not prepare, verify, or vouch for the accuracy of any financial or legal information in a deal package. That verification is the buyer's responsibility, typically carried out with their own professional advisors.