Auto Repair Shop Due Diligence Checklist for Buyers
By the time a buyer signs a letter of intent, they have usually toured the bays, watched the shop on a busy morning and reviewed summary financials. Auto repair shop due diligence is the stage where those impressions are tested against records, inspections and conversations. It is where a buyer learns whether the customer base is broad, whether the technicians are likely to stay, whether the equipment works and whether the property raises environmental questions.
This checklist is general guidance for buyers of existing, operating automotive service businesses. Every transaction is different, and licensing, environmental and employment rules vary by state and locality. Buyers should work with qualified attorneys, accountants and environmental professionals. Nothing here is legal, tax or financial advice.
Financial Records
- Several years of tax returns and financial statements, plus year-to-date results
- Sales by service type and by customer type
- Bank statements to reconcile reported sales
- Repair order history and shop management system reports
- Receivables aging, especially for fleet, commercial and insurance-related work
- A schedule of existing debt, leases and liens
Customers and Where Revenue Comes From
- Revenue from the largest customers and any written agreements
- Fleet and commercial account terms; see our article on auto repair fleet accounts
- For collision shops, insurance referral relationships and how they are documented; see our guide to collision repair shop acquisition
- Online reviews, warranty claims and customer complaints
Technicians and Staff
- Roles, tenure and pay structure for each employee
- Industry certifications held by individual technicians
- Which tools belong to the shop and which belong to technicians
- Employment agreements and any restrictive covenants, reviewed by counsel
- Worker classification, which should be reviewed by qualified professionals
Equipment and Facility
- An equipment list with age, ownership and service records
- Inspection of lifts, compressors, alignment machines, diagnostic tools and any paint booth
- Equipment leases and whether they can be assumed
Our article on auto shop equipment condition explains how buyers evaluate these items.
Property, Lease and Environmental Matters
- The lease, remaining term, renewal options and assignment provisions, or the deed and title if the property is included
- Zoning and permits for automotive use
- Records for used oil, fluids, solvents, parts and waste disposal
- Information about any underground tanks, floor drains or separators
Environmental questions should go to qualified environmental professionals, and a lender may require a review. See our articles on auto repair shop environmental review and auto repair shop real estate.
Licenses, Franchise and Program Rights
- Business licenses and any state or local repair facility registrations
- Franchise or branded program agreements and the approval process for a new owner
- Supplier and parts programs
Licenses, franchise rights and supplier programs should not be assumed to transfer.
What Lenders Will Want
Lenders will review many of the same items, along with the purchase agreement, the buyer’s experience and financial information, and any environmental reports they require. Organized diligence files can help the financing process move forward, though timing depends on the lender and the transaction.
US Professional Funding helps buyers finance the acquisition of existing, operating automotive service businesses. Learn more about our auto repair shop acquisition financing.
