Due diligence is where deals get made or broken. According to Forvis Mazars, it's the process where buyers verify everything you've told them, examine your operations in detail, and identify any risks or issues that might affect the transaction. Being prepared for due diligence speeds up the process, builds buyer confidence, and protects your valuation. See how due diligence fits into your overall timeline with our exit timeline calculator.
This comprehensive checklist covers everything buyers typically request during home care M&A due diligence. Start organizing these documents now, even if you're not planning to sell for a year or more. The process of gathering them often reveals issues you'll want to address before going to market.
Pro Tip: Start Early
According to Forvis Mazars, many agencies discover significant issues during due diligence preparation. Issues that could have been fixed with advance notice. Common problems include cash-basis accounting (buyers want accrual), commingled personal/business expenses, and missing documentation. Give yourself 6-12 months to prepare properly.
Financial Documents
Financial due diligence is the most intensive part of the process. Buyers will scrutinize your numbers in detail, looking for accuracy, consistency, and any red flags.
Core Financial Statements
- 3 years of tax returns (business and personal if S-Corp/LLC)
- Monthly P&L statements for 3 years
- Balance sheets for each year-end
- Current year-to-date financials
- General ledger detail
Supporting Schedules
- Add-back schedule with documentation
- Revenue by payer source breakdown
- Accounts receivable aging report
- Accounts payable summary
- Fixed asset schedule with depreciation
Operational Documents
Operational due diligence examines how your business actually runs. Your clients, referral sources, service delivery, and market position.
Client & Census Data
- Current client census with service details
- Historical census data (monthly for 3 years)
- Top 10 clients by revenue
- Client retention/churn analysis
- Average hours per client per week
Market & Operations
- Referral source breakdown
- Service area map and territory details
- Organizational chart
- Key vendor contracts
- Technology systems inventory
Compliance & Legal Documents
Compliance is critical in healthcare M&A. The HHS Office of Inspector General has published specific compliance guidance for home health agencies, and any regulatory issues can be deal-killers or result in significant price reductions and escrow holdbacks. See our 7 Common Exit Mistakes guide for more on avoiding compliance pitfalls. For state-specific regulatory requirements, check our State-by-State M&A Guides.
Licenses & Certifications
- State licenses and certifications
- Medicare/Medicaid provider agreements
- Accreditation certificates (ACHC, CHAP, Joint Commission)
- Survey history and any plans of correction
- Compliance program documentation
Legal & Insurance
- Insurance policies (liability, workers comp, E&O)
- Claims history for past 5 years
- Any pending litigation or claims
- Corporate documents (articles, bylaws, operating agreement)
- Material contracts and agreements
HR Documents
People are the core asset in home care. The 2025 Activated Insights Benchmarking Report shows that agencies with below-average caregiver turnover command significantly higher valuations. Buyers will examine your workforce closely, looking at retention, compensation, and any employment-related risks.
Workforce Data
- Employee roster with tenure, roles, and compensation
- Caregiver count and turnover rates
- Benefits summary
- Organizational chart with reporting relationships
- Recruiting pipeline and hiring metrics
Agreements & Compliance
- Employment agreements for key staff
- Non-compete and non-solicitation agreements
- Training and certification records
- Background check documentation
- Any pending HR issues or claims
The Bottom Line: Preparation Is Power
Being prepared for due diligence isn't just about having documents organized. it's about demonstrating professionalism, reducing buyer concerns, and maintaining your negotiating position. Sellers who can respond quickly and completely to due diligence requests signal that they run a tight ship.
Start gathering these documents now, even if you're not planning to sell for years. The process often reveals issues you'll want to address before going to market. Our How to Prepare Your Agency for Sale guide provides a complete roadmap.