Buying FedEx Routes: What is “Due Diligence”?

Category: Best Practices

Are you thinking about buying FedEx routes and becoming a FedEx contractor? Or are you a current FedEx ISP looking to expand your business and increase profitability? Regardless of which category applies to you, it is important to do your homework before you decide to purchase FedEx Ground routes for sale—which is why due diligence is such a crucial part of the FedEx purchase process.

As a potential buyer, you want to know exactly what you are getting when you purchase a new route or set of routes. Once you have located a FedEx route in your desired area and completed the initial steps in the buying process, then the real work begins. At this point, you’ll want to take a deep dive into the corporate and financial background of your potential investment to determine whether or not the business is healthy and profitable.

 

The FedEx route buyer due diligence process: An overview

Following a mutually signed letter of intent, you (the buyer) may request a number of due diligence items from the route seller. This is a particularly important step for two reasons:

  1. It allows you to validate the information presented so far in the preliminary stages of discussion; and
  2. It provides clarity about the financial and operational aspects of the business.

 

The due diligence period generally lasts between two and four weeks. 

However, keep in mind that every buyer and every situation will be unique. For example, if you are seeking bank financing for your FedEx route purchase, the bank may require additional due diligence items to secure a loan for your routes, which may extend your timeline.

As the leading FedEx brokerage firm in the nation, KR Capital has worked with countless potential buyers, as well as legal and financial advisors, to ensure prospective ISPs know exactly what to ask for during the due diligence period. Below is an abbreviated list of the documents you may request to ensure you are making a smart financial decision.

 

Corporate Documents

  • Incorporation documents of the company
  • Certificate of good standing for the company
  • Any partnership/joint venture agreements
  • Information about any current or pending legal issues
  • Schedule of shareholders and percentage owned by each person/entity
  • Copy of contract with FedEx, including all amendments

 

Staff/Employee Information

  • List of all active and inactive employees
  • Copies of any employment agreements
  • Copies of any non-compete and/or confidentiality agreements
  • Copy of manager’s resume, if applicable
  • List of employee start dates, compensation, benefits, bonus or incentive-based pay, tenure in the industry, etc.
  • Copy of payroll reports for the last two (2) years
  • Copy of all employee handbooks and personnel policies
  • Summary of employee vacation plan, overtime pay, bonus plans, etc.

 

Financial Documents

  • Bank statements for previous year and any YTD activity
  • Corporate tax returns for the past three (3) years
  • Profit and loss (P&L) statements for the past three (3) years
  • Current YTD profit and loss statement
  • Current balance sheet
  • Asset list
  • Payroll reports
  • Summary of all deposit accounts, savings accounts, and other financial accounts
  • Review of all applicable insurance policies (vehicle, workman’s comp, health, etc.)
  • Copies of any leases and loans, including stockholder loans and notes payable
  • Copies of all vehicle maintenance reports
  • Last 12 months of FedEx settlement statements

 

Getting it right is important—too important to go it alone.

Just as critical for current contractors as it is for first-time P&D or linehaul route buyers, the due diligence process can make or break your FedEx route sale. Without it, you may enter into a deal without knowing what you are really getting into—which could be disastrous for your financial future.

That said, it pays to have an expert on your side.

KR Capital has been helping contractors navigate the complex FedEx approval process for over a decade. Our team has the knowledge and experience necessary to help you ask the right questions and request the right documents to ensure a thorough due diligence is performed. Contact us today to get started, or fill out our online Buyer Info Request form to learn more.