Due Diligence: Operations Management–Capacity

Performing a thorough due diligence on a potential acquisition is one of the most important tasks that a buyer needs to do when making a purchase decision. We’ve put together a list of items that buyers will want to investigate when talking to a seller.

This is part of a large series. Be sure to scan our Buyers Blog for the category Due Diligence.

Now we’re moving on into evaluating the Operating Management of your potential acquisition portion of your Due Diligence tasks. The purpose of this section is to understand the Capacity and the opportunity that you’ll have to increase it using the existing resources or by adding or improving them.

A. Capacity

– Determine the facility overhead cost required for minimum, standard, and maximum capacity.

– Ascertain the amount of capital replacements needed in the near future.

– Determine the periodic maintenance cost of existing equipment.

– Estimate the cost of modifications needed to increase the capacity of each line of business.

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