16-04 DUE DILIGENCE HANDBOOK
Financing Activities - Form 16-10 (Continued)
Relations - Form 16-11
This activity is primarily related to publicly owned companies.
The primary responsibility for investor relations will sometimes fall under the Finance Department and some-
times under the Public Relations Department. In some firms the Chief Executive Officer will take on the primary
responsibility. This latter option is particularly prevalent when the CEO came up through the financial ranks.
If the entity under investigation is a public company, it is very important to determine how the investment com-
munity views the firm. Their opinion can have a major impact on the availability and/or cost of future financing.
A privately held company has a similar requirement if it currently engages in, or contemplates, future
The issue of “corporate governance” is taking on increasing importance as both equity and debt holders are
expressing their dissatisfaction with both management and boards of directors.
Investment Management - Form 16-12
Companies with excess funds frequently make short and/or long term investments in government and other
marketable securities. Form 16-12, when completed, will provide a status report on these investments.
Form 16-12 covers certain financial aspects related to employee pension and other post-retirement plans.
Form 19-07 provides for a description of the various plans, including the past and current costs of
maintaining such plans.
The investment decisions on the moneys used to fund these plans are generally in the hands of third parties,
such as insurance companies, bank trust departments or independent trustees.
WHAT TO LOOK FOR
How do institutional investors view the entity?
How does the investment banking community view the entity?
How do the commercial banks view the entity?
Has any group of security holders petitioned the entity, or solicited other investor support, to
effect changes in the entity’s by-laws or impose other restrictions on how the entity conducts
its business affairs?
If so, what are the issues that have been raised?
WHAT TO LOOK FOR
Are the general terms and conditions of these financing activities too severe, about right, or bet-
ter than might be achieved in today’s market?
If too severe, what are the possibilities of refinancing under better terms?