Pest control company due diligence

You have a signed letter of intent and a deadline. This guide covers what to ask for and search, in an order that puts the most important questions first. For a pest control company the central question is whether the service book the seller described can be served by you on day one. That depends on contracts, on credentials, and on whether the vehicles and equipment come free of other people’s claims. General due diligence applies as well. This page covers what is particular to this business. Anything about pesticide licensing is a question for the provincial regulator where the business operates.

Test the account list against the money

Ask for the account list by customer, with start date, service frequency and price, and then match a sample to invoices and bank deposits for the same customers. The aim is to learn whether the accounts the seller calls recurring were billed on schedule and paid. Ask for accounts lost over the same period and why. If a customer appears on the list but not in the deposits, you have found a question to put to the seller before closing, not after. Ask for the agreements behind the commercial accounts and read them for term, notice and assignment. Ask also for the seller’s records of service visits for those accounts, so you can see that the work contracted was the work performed, and note any customer whose visits have fallen behind schedule.

Search for liens on vehicles and equipment

Service vehicles and equipment are among the hard assets you can identify in a deal like this, so search before you pay. Alberta tells buyers to search its personal property registry before buying any items that count as personal property, and lists vehicles among the items that can be registered. British Columbia says to make sure personal property has no liens registered against it before you buy. Ontario’s Personal Property Security Act, R.S.O. 1990, c. P.10, covers security interests in Ontario; check which registry applies wherever the assets are. Search the seller’s legal name and any prior names, and obtain a written plan for discharging anything found.

Confirm credentials one person at a time

Ask the seller for a list of every technician with the credential each holds, who issued it, and when it was issued or renewed, then verify it with the regulator. Match that list to the schedule of routes. If one credentialed person covers many stops, ask what happens when that person is off. Ask the regulator in writing whether anything is outstanding against the company, such as an inspection finding or an order. A gap here could leave customers you are paying for with no one allowed to service them, so ask your lawyer what it would mean for the deal.

Handle customer data carefully

If your diligence requires household customer details, PIPEDA section 7.2 allows parties to a prospective business transaction to use and disclose personal information without the individual’s knowledge or consent if its conditions are met. Those conditions include an agreement requiring the recipient to use it solely for purposes related to the transaction, to protect it with security safeguards appropriate to its sensitivity and to return or destroy it within a reasonable time if the deal does not proceed, and that the information is necessary to determine whether to proceed and, if the determination is made to proceed, to complete the transaction. Section 7.2(4) excludes a transaction whose primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information. Ask for what you need to answer a question, not the whole database, and keep a record of who received it.

Read the contracts for what transfers

Read each customer contract for a clause on assignment or consent, a notice period, and anything that lets the customer leave on a change of ownership. Read supplier terms, vehicle leases and the franchise agreement the same way. If the franchisor must approve a buyer, ask your lawyer to make that approval a closing condition. Where the company is a corporation and you are buying shares, ask for its register of individuals with significant control and compare it with the shareholder list the seller gave you. Some of that information is available publicly for federal corporations through Corporations Canada’s online search.

What a finding means

Sort what you find by what it lets you do. Ask whether a lien on a vehicle can be discharged at closing. Ask whether a credential held by one person who plans to leave can be dealt with by a clause at all, or whether it changes what you are buying. An account the seller called recurring that was not in fact paid is a question about the price basis. Ask your lawyer to state what each significant finding does to the purchase agreement, whether a representation, a closing condition, a holdback or a reason to stop.

• Account list matched to invoices and deposits for a sample of customers, with lost accounts and the reasons
• Registry searches in the seller’s legal and former names for every vehicle and major piece of equipment
• Regulator confirmation of the company’s standing and each technician’s credential, in writing
• Customer, supplier, lease and franchise agreements read for assignment, notice and change-of-control terms
• A record of which customer data was released, to whom, and when it was returned or destroyed