Digital Marketing Agency Due Diligence Checklist for Buyers
By the time a buyer signs a letter of intent on an agency, they have usually reviewed summary financials, heard about the client roster and met the founder. Digital marketing agency due diligence is where those impressions are tested against records: client contracts, billing data, payroll and contractor files, account access and data practices. Because an agency’s value rests on relationships that can change quickly, a careful review is one of the best protections a buyer has.
This checklist is general information for buyers of existing, operating digital marketing agencies. It is not exhaustive, and each transaction is different. Contract, employment, privacy and tax questions should be reviewed with qualified attorneys and accountants. Nothing here is legal, tax or financial advice.
Financial Records
- Several years of business tax returns and financial statements
- Year-to-date financials and monthly revenue history
- Revenue by client and by service line, reconciled to bank deposits
- Receivables aging and collection history
- Documentation for each proposed add-back
- A schedule of all existing debt and other obligations
Gross Billings and Pass-Through Spend
Ask how media purchased for clients is billed, recorded and paid, whether the agency carries credit risk on media it pays before collecting from clients and how any markups or management fees are calculated. See our article on pass-through ad spend.
Clients and Contracts
- A client list with start dates, services, monthly fees and relationship owner
- Signed agreements, statements of work and any amendments
- Term, renewal, notice and termination provisions
- Assignment and change-of-control clauses, and whether client consent may be needed
- History of lost clients and, where known, the reasons
Our guides to marketing agency client retainers and marketing agency client concentration explain how to read this data.
People
- An organizational chart with roles, tenure and compensation
- Which employees manage which client relationships
- Employment, confidentiality and non-solicitation agreements, reviewed by counsel for enforceability
- Bonus, commission or equity arrangements that could be triggered by a sale
See our article on marketing agency key employees.
Contractors, Offshore Teams and White-Label Partners
Request agreements with freelancers, offshore teams and subcontracted or white-label providers, including ownership of work product and confidentiality terms. Worker classification should be reviewed with qualified professionals. Our article on marketing agency contractors covers these arrangements.
Accounts, Tools and Client Data
- Who owns each advertising platform account, analytics property, hosting account and domain the agency manages
- Software tool subscriptions and whether licenses can be transferred
- Any partner or certification status and whether it is tied to individuals or to the agency
- Data handling practices, privacy policies and any security incidents, reviewed with counsel
Our article on agency accounts and client data explains why these items should not be assumed to transfer.
Legal and Operational Matters
- Pending or threatened disputes with clients, employees or vendors
- Office lease terms and landlord consent requirements, if the agency leases space
- Insurance coverage and claims history
- Intellectual property, including the agency’s name, website and any proprietary processes
How Due Diligence Affects Financing
Lenders will review much of the same information, and gaps found in diligence may affect pricing, structure or whether financing is available. Organized findings can make the lender’s review smoother, though timing depends on the lender and the transaction.
US Professional Funding helps buyers finance the acquisition of existing, operating digital marketing agencies. Learn more about our digital marketing agency acquisition financing.
