Insulation contractor due diligence

Once a letter of intent is signed, diligence is the point at which a seller’s account of the business is checked against paper. In an insulation firm the paper is specific: who holds the manufacturer certificates, who signed the builder contracts, what was installed and whether anyone complained, which rigs are pledged to a lender, and whether the workers’ compensation account is in good standing. Work through these in an order that lets you stop early, starting with the items that are hardest to repair. A finding that cannot be fixed before closing is a pricing question or a walk-away question, and your lawyer should help you tell which.

Certifications and licences first

Ask for every applicator certificate, with the name of the holder, the manufacturer and the expiry. Confirm with the manufacturer, not the seller, that each one is current and what it takes for your crew to be recognised. In Quebec, the RBQ publishes a licence holders’ repertory, and its licence pages describe subclasses and licence security, so check the firm’s licence there and ask what happens to it on a change of ownership. Ask what work the firm could not do if a certificate cannot be re-earned or transferred.

Contracts and customer concentration

Read each builder contract for term, termination, assignment and change-of-control wording, and ask whether any builder has been told about the sale. Tally the last few years of revenue by customer to see how much rests on a few names; customer concentration explains why that matters. If a rebate programme feeds the retrofit side, ask for the programme terms the firm worked under and for lead records by job.

Installed-work claims and warranties

Request the complaint log, any demand letters, insurer correspondence and the list of warranty promises the firm has made. Ask whether any job has been reopened, and whether the firm carries liability cover for completed operations and for how long. Ask your lawyer how an asset purchase or a share purchase changes who keeps these claims, and how representations, a holdback or an indemnity address them.

Liens, equipment and the registry search

Ask your lawyer to search the personal property registry in the relevant province for security registered against the company or its rigs. Ontario’s Personal Property Security Act, for example, sets out registration of financing statements and perfection by registration, and other provinces have their own statutes. Match each registration to a loan, and plan for a discharge at closing. Inspect the trucks and spray equipment, and compare serial numbers with the lender’s records and the fixed-asset schedule.

Workers’ compensation and employment

The WSIB says it may hold a purchaser liable for amounts owed by the vendor up to the date of sale if there is no valid purchase certificate, that a certificate is valid for 30 days from its issue date, and that a share sale does not require one. In Newfoundland and Labrador, WorkplaceNL says a clearance letter confirms whether a contractor has its own coverage and is in good standing. Other provinces differ, so ask which board applies and request the clearance before closing.

Findings that end a deal

A certification the manufacturer will not extend to your crew, a builder who confirms it will not continue after the sale, a pattern of unresolved defect claims, or an undisclosed lien that cannot be discharged at closing can undermine the earnings the price assumed. When one appears, stop and ask your lawyer and accountant whether the price, the structure or the decision to proceed needs to change. Record the finding and the response in writing.

Sequence the work

Run the checks that can end the deal first and the routine ones last. Certifications, builder consent and claims history come before inventory counts and payroll tests. Order the registry searches and the workers’ compensation clearance early, so that third-party responses are in hand when you need them. Keep a running list of open items with the person responsible for each, and give the seller a date by which each document is due. Where a document is late or incomplete, note it in writing and raise it with your lawyer before the conditions period ends, so that the delay does not quietly become your risk.

• Manufacturer-confirmed certificate list and a written path for your crew to be recognised
• Builder contracts with assignment, change-of-control and termination clauses highlighted
• Complaint log, demand letters, insurer correspondence and the warranties given on completed jobs
• Registry search results matched to each loan, with discharge terms for closing
• Workers’ compensation clearance or purchase certificate dated close to closing