Landscaping and grounds maintenance company due diligence

Once a letter of intent is signed, due diligence is where the claims made during negotiation get tested against paper. In a landscaping company, look for that paper in the contracts, equipment records, payroll and any registrations with provincial bodies. This guide sets out which documents to request, which registries to search, and which findings matter most here. Work through it with your lawyer and accountant. BDC says buyers will ask to see historic and interim financial statements, projections and tax returns, and that a lawyer is needed to supply information during due diligence and negotiate the purchase agreement. The sections below add what is particular to this sub-sector. Ask for documents in writing, keep a log of what was requested and received, and note anything the seller declines to provide, since a refusal is itself a finding that you may need to discuss with your lawyer before you proceed.

Test the contract book against the paper

Ask for every maintenance contract and match the list to revenue by customer. Note the start date, term, renewal mechanism, price adjustment, termination rights and any clause that requires the customer’s consent or notice if the contract is assigned or the company changes hands. Where there is no contract, ask for invoices and how long the relationship has run, and treat that revenue as unsupported until a customer confirms it. Ask which customers hold more than one contract, and whether any was recently re-tendered. Where a large commercial or municipal contract came through a tender, ask whether it required a bond and what happens to the bond on a change of ownership. If possible, speak to the largest customers, with the seller’s agreement, to confirm the relationship and the work done. A seller’s statement that a book is multi-year is a claim for the paper to prove. Record any gap between the revenue schedule and the signed contracts, and put the question to the seller in writing so the answer is on file.

Search for liens on the fleet

Equipment may be financed, so search for registered security interests against the company and against the owner. Ontario’s Access Now system lets you find out whether a lien has been filed in the province’s Personal Property Security Registration system. Alberta and British Columbia each run their own personal property registries and provide searches. Search where the company and its equipment are based, and keep the date of each search. If a search shows a registration the seller did not mention, ask what debt it secures and whether it will be discharged at closing. A search is also a chance to compare serial numbers on the equipment list against what is registered.

Confirm workers’ compensation standing

The WSIB in Ontario says a purchase certificate verifies that the seller has coverage and no outstanding debts on the account, that it may hold the purchaser liable for the vendor’s amounts to the date of sale without one, and that the request must be made before the date of sale. WorkSafeBC says assets may be subject to a lien if the seller owes premiums. Confirm the rule for each province where crews work. Also review claims history, and ask the seller to explain any open claim or rising premium. Ask for insurance policies and loss runs alongside it, and have your insurance broker confirm that the coverage matches the work the crews actually do.

Check how crews and subcontractors are engaged

If the company uses seasonal crews or subcontractors, check how each person is paid and why. The Canada Revenue Agency says an employee generally works under the direction and control of the business that hired them, while a self-employed worker is free to choose how to carry out the contract. A worker paid as a contractor who is in fact directed like an employee raises a question for the purchase agreement: who bears the cost if the classification is challenged? For subcontractors, WCB-Alberta says that without a clearance letter, and where a contractor has not paid its premiums, you may be liable for them, and that the clearance should be obtained before you hire the contractor and before releasing payment. Ask each province’s board for its equivalent rule.

Findings that can end a deal

Some findings change the price. A few change the answer. A contract book that turns out to be informal rather than multi-year changes what the buyer is paying for. A fleet needing replacement well beyond what the seller disclosed has the same effect. A lapsed or missing pesticide or fertilizer applicator licence, where the provincial body confirms that one is required, is a finding to take to your lawyer, since it may affect whether part of the business can operate. Residential revenue that proves to depend on the owner and a few crew leads, with no one else managing those accounts, can be a retention risk. For a related method, see how to run a PPSA registry search before buying business assets.