Tree care and arborist company due diligence

You have a letter of intent and a window to confirm what you were told. In a tree care company, some of the facts to check are not in the financial statements. They may sit in claim files, contract wording, equipment registrations and the account with the workers’ compensation board. This guide is a work plan for that window: what to request, which searches to run yourself, and what each kind of finding means. Ask your lawyer and accountant to run the formal review; use this to know what to put on their list.

Contracts first

Request every utility, municipal and commercial agreement, with amendments and any renewal or extension letters. Read for the end date, who can end it and on what notice, whether the other party must consent to a change of owner, and how the work was awarded. A contract that turns out to end soon, or that needs consent no one has asked for, changes what you are buying. Ask the seller what happens if consent is refused, and put the answer in the purchase agreement. Also ask for the tender documents or award letters behind each public contract and any performance reviews the customer has issued, since those show how the customer sees the work.

Claims, incidents and insurance

Ask for a list of every injury, property-damage and liability claim, open or closed, with the insurer’s file reference. Request the insurance policies and ask the insurer or broker for its record of claims on the policy. Check whether the coverage limits match the work the crews actually do, including work near buildings and power lines, and ask the broker to confirm in writing what the policies would cover after a change of owner. A claim history can reach back years, and a claim made after closing may still relate to a job done under the old owner, so ask your lawyer how the agreement should allocate that risk. Ask too for any complaints from homeowners or neighbours, even where no claim followed, because they may show how jobs go wrong in practice.

Registry searches you can run yourself

Ontario’s personal property registry lets you search for a lien filed against personal property, and it advises searching before buying used goods. British Columbia’s Personal Property Registry records security interests and liens under its Personal Property Security Act, and Alberta advises searching its registry before buying personal property. Search the seller’s company name and the serial number of each truck, chipper and grinder. If you find a lien you did not expect, ask how it will be paid out or released at closing, who will arrange it and who will confirm in writing that it has been discharged.

Workers’ compensation and safety records

The Workplace Safety and Insurance Board (WSIB) says a purchase certificate verifies that the company selling, leasing or transferring all or part of a business has WSIB coverage and no outstanding debts on the account, that it must be requested before the date of sale, and that it is valid for 30 days. WorkSafeBC says to contact it before buying any assets from a firm, because if the seller is indebted to it for unpaid premiums, the firm’s assets may be subject to a lien in its favour. Ask for the account’s claims history, and ask whether any open claim could change the company’s premiums after closing. Ontario also issues CVOR abstracts summarizing a carrier’s collisions, convictions and inspections; ask whether that applies to any vehicle the company runs.

Equipment condition and records

Walk the yard with the equipment schedule in hand and match every unit to a serial number, an ownership record and a maintenance file. Consider paying an independent mechanic to inspect the bucket trucks, chippers and grinders, since the seller’s opinion of their condition is not an inspection. Ask for inspection certificates on lifting equipment and for the records of repairs that were deferred. Compare the age of the fleet with the capital spending the seller says is planned, and ask the seller to explain any gap.

Utility locates and how the crews work near lines

If any work involves digging, such as stump removal or planting, ask how the company requests and keeps utility locates. Ontario Dig Authority, formerly Ontario One Call, says a complete locate package must be kept at the excavation site and that all crew members must review it before work begins. Ask to see recent examples, and ask who is responsible for keeping them on site. If the answer is vague, treat that as a finding to raise with your lawyer. For line-clearance work, ask for the training records and the written procedures the crews follow near energized lines.

• A lien on a key truck or chipper that the seller cannot release at closing.
• An unpaid workers’ compensation balance or a missing clearance.
• A major contract that cannot be assigned or that ends soon after closing.
• Open or undisclosed injury or property-damage claims.
• Credentials held by one person who does not plan to stay.