Electrical Contractor Due Diligence Checklist for Buyers
Once a buyer and seller agree on general terms, due diligence is where the buyer confirms what they are actually acquiring. For an electrical contractor, that means more than reviewing financial statements. Licensing, open jobs, customer relationships, the electricians who do the work, vehicles, insurance and safety history all affect whether the business will perform the same way under new ownership. Thorough electrical contractor due diligence also gives lenders the documentation they need to evaluate the loan.
This checklist is a general guide for buying an existing, operating electrical contractor. Requirements vary by state, locality and transaction, and buyers should work with qualified attorneys, accountants and insurance professionals. Nothing here is legal, tax or regulatory advice.
Financial Records
- Business tax returns and financial statements for several years, plus year-to-date figures
- Revenue broken out by customer, by type of work and by month
- Job cost reports showing estimated versus actual results on completed jobs
- Accounts receivable and accounts payable aging
- Documentation for every proposed add-back or owner adjustment
- Bank statements to reconcile reported revenue
- All existing debt, leases and liens, including any merchant cash advances or other financing
Our guide to electrical contractor valuation explains how these records feed into value.
Licensing and Permits
- Which licenses the business holds and who the qualifying individual is for each
- Whether that person will remain after closing, and what happens if they do not
- Local registrations and permit history
- Any complaints, disciplinary actions or open code issues
Licenses should not be assumed to transfer with the business. See our article on electrical contractor license transfer and owner dependence.
Open Jobs, Contracts and Backlog
- A schedule of every open job with contract value, amount billed, cost to date and estimated cost to complete
- Signed contracts, change orders and any disputed amounts
- Retainage receivable and payable
- Maintenance and service agreements, including terms and renewal history
- Bonded projects and the surety relationship
Our article on electrical contractor backlog, work in progress, retainage and bonding covers these items in depth.
Customers and Relationships
- Top customers and general contractors by revenue over several years
- Whether key relationships run through the owner personally
- Bid history and win rates with major customers, if available
- Online reputation and any significant customer complaints
Electricians and Staff
- Employee roster with roles, tenure, licensing status and pay
- Foremen, estimators and office staff who hold critical knowledge
- Benefits, bonuses and any written employment agreements
- Union status or collective bargaining agreements, if applicable
- How workers are classified, which should be reviewed with qualified professionals
Keeping the team is often essential to the deal. See our guide to electrician retention.
Vehicles, Tools and Inventory
- List of vans and trucks with titles, condition, mileage and any liens
- Tools and specialized equipment included in the sale
- Materials inventory and how it is counted and valued
Insurance, Safety and Legal
- Current insurance policies and claims history
- Safety records, training programs and any inspection findings
- Warranty obligations and callbacks on completed work
- Pending or threatened lawsuits, liens or disputes
- Facility or yard lease terms
Whether the buyer takes on historical liabilities depends partly on how the deal is structured. Our article on asset vs. stock purchase explains the differences.
What Lenders Will Request
Many of the same records support the loan application. Lenders typically want tax returns, financial statements, receivables aging, a debt schedule, the purchase agreement, licensing details and information about the buyer’s experience. Organizing due diligence materials early can help the financing process move more smoothly, though timing always depends on the lender and the transaction.
US Professional Funding helps buyers finance the acquisition of existing, operating electrical contractors. Learn more about our electrical contracting acquisition financing.
