Pool installation and service company due diligence

Once a buyer has signed a letter of intent for a pool company, the work is to turn the seller’s description into documents. The documents worth asking for here concern money held for pools not yet built, claims on pools already built, proof that regulated work was done by people allowed to do it, and ownership of the trucks and equipment. This guide lists what to request, which searches to run, and what a bad finding means for the deal. It does not tell any buyer whether to proceed.

Test the backlog against the deposits

Ask for the full backlog schedule with each signed contract, price, deposit received, and scheduled start. Then ask for the bank statements and ledger showing where that deposit money is. Compare the two. If deposits were collected but spent on operations, the buyer may inherit work to be built with money that no longer exists. Ask the crew leads whether the schedule is achievable. If the deposits and the backlog do not match, raise it with your lawyer and accountant; one option is a purchase-price adjustment for deposits the buyer must deliver against. Ask also for the cancellation terms in the contracts, any change orders, and whether any job has started without its deposit being recorded, since each of those changes what the schedule is really worth.

Read the claims and warranty file

Ask for every customer complaint, warranty claim and legal notice relating to shells, liners or structural failure, with the outcome of each and any amount paid. Ask for the company’s insurance policies and claims history. Ask whether any similar failures recur and what caused them. Ask whether any claims were settled informally, whether any customer has threatened to sue, and whether the company has ever replaced a liner or repaired a shell at its own cost without a written claim. Take any claim with unresolved exposure to your lawyer before going further.

Verify electrical and gas documentation

Ask for the permits, inspection records and sign-offs for electrical and gas work on installed equipment, such as heaters, bonding and grounding. The Electrical Safety Authority states that in Ontario only contractors it licenses may do electrical work for hire, so confirm the licence status of whoever did that work, and the status of subcontractors named in the file. In British Columbia, Technical Safety BC states that a Field Safety Representative must be named on every electrical permit application, so check that the named person is accurate. Missing sign-off documents on completed installations are a liability question for your lawyer. If the company works across several municipalities, ask for the building permits it pulled for new installations, confirm which local requirements applied, and ask for any open orders or inspection deficiencies.

Search for liens on vehicles and equipment

A pool company may own trucks, trailers, excavation equipment and service gear, and a lender may have registered a claim against them. Ontario’s Access Now service can be used to find out whether a lien has been filed in the Personal Property Security Registration system. British Columbia’s Personal Property Registry records security interests and liens against personal property belonging to businesses. Search each province where the company operates, using each legal name the company has used. The PPSA search answer explains the steps. Ask your lawyer what a registered lien means for the asset.

Check customer data and employees

Confirm how customer information will be handled. PIPEDA section 7.2 sets the conditions, including an agreement about use, safeguards and return or destruction within a reasonable time if the transaction does not proceed, under which organizations that are parties to a prospective business transaction may use and disclose personal information without the individual’s knowledge or consent. Ask the seller for the privacy policy and consent language the company uses with customers. For staff, ask for employment agreements, tenure, and any outstanding wages or leave. British Columbia’s Employment Standards Act deems employment continuous when all or part of a business is disposed of, so the purchaser there must treat employees as though their employment is continuous; the Branch says that if employees employed when the business is disposed of are later terminated, the purchaser is responsible for any compensation for length of service, or notice in lieu, calculated from the date the original seller hired them, and any other outstanding wages including annual vacation pay. The Branch treats a sale by a trustee in bankruptcy differently. Ask your lawyer about the rule in each province where employees work. Also review the subcontractor agreements: who carries insurance, who owns the relationship with the customer, and whether the subcontractors will work for the buyer on the same terms.

• Backlog schedule, signed contracts and proof that deposit money is held
• Complete claims, warranty and insurance history for shells and liners
• Permits and sign-offs for electrical and gas work, plus licence status of those who did it
• Lien searches in each relevant province for every legal name used
• Customer-data practices, employment agreements and subcontractor contracts