Electrical Business Due Diligence Checklist (Australia)

Electrical Business Due Diligence Checklist — Australia

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Phase 1: Knockout Checks (Do These First)

Complete this phase before requesting full financials. These are the deal-breakers.

1.1 Electrical Contractor Licence

• Confirm the contractor licence is current (search the regulator's public register for your state: Fair Trading NSW / Energy Safe Victoria / QBCC Qld / EnergySafety WA / CBS SA / WorkSafe Tas / Access Canberra ACT / NT WorkSafe NT)
• Confirm the licence holder is an employee or director of the business (not a silent third party)
• Confirm whether the licence transfers to you — or whether you need to apply for a new contractor licence yourself
• If you don't hold a contractor licence, confirm there's a path to putting one in place before settlement: either you apply, or a named employee holds it
• Check the licence for any restrictions, conditions, or endorsements that limit the type of work the business can do

1.2 Individual Electrician Licences

• Obtain a full staff list showing each person's licence type and licence number
• Verify each current electrician's licence on the relevant state register (licences can be valid, suspended, expired, or cancelled — check each one)
• Note which staff hold restricted licences covering specialised work (high-voltage, solar, fire detection circuits, data cabling)
• Confirm whether any licences expire within 12 months of settlement and what the renewal process is

1.3 Licensing Pyramid — Staff Structure

• Map the structure: how many licensed contractors, how many qualified electricians, how many apprentices, how many admin staff
• Confirm the apprentice-to-electrician ratio complies with your state's licensing requirements (typically 1:1 or 1:2)
• Identify who can hold the contractor licence after settlement — if it's only the current owner, flag this as a critical issue
• If apprentices are enrolled in a training contract, confirm the training contract details and any obligations on the employer

1.4 Basic Financial Health

• Request and review the most recent 12 months of bank statements
• Confirm revenue is being deposited regularly and patterns are consistent
• Check for any gap months where deposits dropped significantly (ask for explanation)
• Request a current aged debtors list — if debtors are more than 60 days old on average, ask why

1.5 Existing Compliance Notices

• Ask the vendor directly: are there any outstanding compliance notices, infringement notices, or safety improvement notices from any regulator?
• Conduct an independent check with the relevant state electrical safety regulator for any notices on the contractor licence or business name
• Check ASIC for any PPSR encumbrances registered against the business name or ABN

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Phase 2: Financial Deep-Dive

2.1 Three-Year Financial Review

• Request three years of tax returns (company or individual, depending on structure)
• Request three years of profit and loss statements and balance sheets
• Cross-reference P&L revenue against tax returns — material differences need explanation
• Request all BAS lodgements for the past three years
• Cross-reference BAS GST-collected figures against P&L revenue (divide BAS total GST collected by 10, then compare to P&L revenue — discrepancies can indicate unreported cash)
• Request the most recent management accounts (should be within 60 days of current date)

2.2 Revenue Quality

• Break revenue into categories: residential service, residential new builds, commercial maintenance contracts, commercial project work, industrial, government
• Identify what percentage of revenue is from each category
• For commercial maintenance contracts: request copies of all current contracts, check notice periods and change-of-control clauses
• For residential: assess whether revenue depends on owner relationships or referral networks that may not transfer
• For builder/developer relationships: ask what percentage of revenue comes from the top 3 builders — if one builder accounts for more than 30% of revenue, this is a concentration risk

2.3 Gross Margin and Labour

• Calculate gross margin: (Revenue minus direct labour and materials) divided by Revenue
• Compare to the ATO benchmark for electrical contractors: 37-47% gross margin is typical
• If gross margin is below 35%, investigate whether jobs are being priced correctly or whether the owner is subsidising labour with unpaid overtime
• Request a breakdown of labour costs between employed staff, subcontractors, and owner labour
• If the owner is working in the business as a tradesperson, estimate the market replacement cost for that role

2.4 Add-Backs and Seller's Discretionary Earnings

• Obtain the vendor's add-backs schedule (if provided by the broker) or prepare your own
• Verify each add-back: owner wages and superannuation (confirm against payroll records), personal vehicle expenses, personal equipment purchases, one-off items
• Be sceptical of add-backs for "owner travel" or "entertainment" without supporting documentation
• Recalculate seller's discretionary earnings (SDE) after removing any add-backs you can't verify
• Confirm SDE is calculated correctly: EBIT plus owner wages/super, plus add-backs, plus non-cash depreciation (if applicable)

2.5 Work in Progress

• Request a current WIP schedule: all jobs quoted, in progress, or completed but not yet invoiced
• For each significant incomplete job: confirm the original quote, costs incurred to date, and estimated cost to complete
• For any fixed-price jobs: verify the quote was based on current material and labour costs (a job quoted two years ago at old cable prices may now be a loss)
• Confirm how WIP will be valued at settlement — unbilled WIP should typically transfer to the buyer at cost, not at anticipated invoice value

2.6 Debtors and Creditors

• Review aged debtors list: flag any debts over 60 days as potentially uncollectable
• Ask for the history of any debt that is 90 days or older — has it been chased? Is it disputed?
• Review accounts payable — is the business paying suppliers on time? Stretched creditors can indicate cash flow pressure
• Confirm any material prepaid invoices or deposits (e.g., deposits paid to suppliers for stock orders) will transfer or be refunded

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Phase 3: Legal and Contracts

3.1 Business Structure

• Confirm whether you're buying shares in a company or assets of the business — the DD implications are different (a share purchase means you inherit all liabilities)
• If buying shares: request a full copy of the company's ASIC register (confirm directors, shareholders, constitution)
• If buying assets: confirm which assets are included in the sale and which are excluded
• Check for any personal guarantees the company has given that may survive a share purchase

3.2 Commercial Lease

• Obtain a copy of the lease for any premises (workshop, office, storage)
• Confirm the lease term, any options, and the current annual rent
• Confirm whether the landlord's consent is required for a change of ownership
• Review any make-good obligations at lease end — electrical workshops can have significant make-good costs
• Check whether the lease has a personal guarantee from the current owner that will need to be replaced by you

3.3 Employment Agreements

• Request copies of all employment agreements (or confirm all staff are employed under the standard award)
• Confirm which award covers electricians in the business — the Electrical, Electronic and Communications Contracting Award 2020 (federal) is most common
• Check whether any staff are on individual flexibility arrangements or enterprise agreements
• Confirm all apprentices have valid training contracts and that the training provider is accredited

3.4 Commercial Contracts and Customer Agreements

• Obtain copies of all current commercial maintenance contracts or retainer agreements
• Check each contract for change-of-control or assignment clauses — many commercial contracts require customer consent to transfer
• Identify any contracts that are in the vendor's personal name (not the company) — these may not transfer at all
• Confirm any government or council contracts include new owner eligibility — some require retendering
• For body corporate or strata management contracts: contact the managing agent to confirm transferability

3.5 Restraint of Trade

• Ensure the sale contract includes a restraint of trade clause preventing the vendor from competing in your geographic area and/or service niche
• Typical restraint: 2-3 years, within the trading area, for the same type of electrical work
• If there are employed electricians who might leave and set up in competition, consider whether key staff should also sign restraint clauses

3.6 Intellectual Property

• Confirm the business name (trading name) is owned by the company or will be transferred as part of the sale
• Check whether there are any domain names, social media accounts, or Google Business profiles — confirm these will transfer
• If the business uses custom quoting software or estimating templates, confirm these are owned by the business (not the principal or a contractor who built them)

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Phase 4: Plant and Equipment

4.1 Vehicles

• Obtain a full list of all vehicles used in the business (registration numbers, make, model, year)
• Confirm ownership: owned outright by the business, or under a chattel mortgage, lease, or novated lease?
• Run a PPSR check on each vehicle to confirm no encumbrances beyond disclosed finance
• Inspect each vehicle physically — check condition, maintenance logbooks, service history
• Confirm rego is current on all vehicles
• If vehicles are financed, obtain payout figures and factor these into the deal

4.2 Test and Measurement Equipment

• Obtain a list of all test and measurement equipment (multimeters, insulation testers, RCD testers, loop impedance testers, thermal cameras)
• Check calibration certificates for any equipment used in compliance testing — out-of-calibration instruments mean past compliance tests may be invalid
• Physically inspect the condition of major test equipment — this category gets beaten up on site and can be worth far less than book value
• Confirm whether any equipment is on hire or loan from a supplier and will not transfer

4.3 Power Tools and Hand Tools

• Request a tool inventory or asset register
• Do a physical count against the asset list during site inspection
• Note any tools that appear to be personal items of the owner (not business assets) — these may be excluded from the sale
• Check whether any tools are on a credit facility or trade account that will need to be paid out

4.4 Stock on Hand

• Request a current stock list with values (cable, conduit, switchboard components, fixings, light fittings)
• Physically verify the stock during inspection — is it actually there, and in usable condition?
• Check for any superseded or discontinued stock items that may not be sellable at book value
• Confirm how stock will be valued at settlement — this is usually dealt with by a stocktake at or near settlement date

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Phase 5: WHS and Compliance

5.1 Safe Work Method Statements

• Confirm the business has documented SWMS for all categories of high-risk electrical work performed
• Review at least 3 SWMS — are they specific to the actual work tasks, or generic templates that wouldn't pass a regulator's scrutiny?
• Confirm SWMS are reviewed and updated at least annually (or when work conditions change)
• Check whether client sites require site-specific SWMS — confirm these are being prepared and retained

5.2 Incident and Near-Miss Register

• Request the incident and near-miss register for the past three years
• A nil register for an active electrical business is a red flag — either incidents are occurring but not being recorded, or the WHS system is essentially paperwork-only
• Review any recorded incidents: were they properly investigated? Were corrective actions implemented?
• Check whether any incidents resulted in a workers' compensation claim — obtain claims history from the insurer

5.3 Insurance

• Confirm current public liability insurance: minimum $10 million, and check expiry date
• Request the last three years of PLI certificates and check for any claims or endorsements
• Confirm workers' compensation insurance is current and premium payments are up to date
• Check any tools/equipment insurance and whether it will transfer or need to be reissued
• If vehicles are used for towing or carrying equipment, confirm whether commercial motor vehicle insurance covers the loads

5.4 Regulator History

• Ask the vendor directly whether there have been any inspections by the electrical safety regulator in the past three years, and the outcome
• Confirm there are no outstanding compliance notices, improvement notices, or prohibition notices
• For Queensland businesses: check whether the QBCC has any record of disciplinary action against the contractor licence
• Confirm whether the business has ever been investigated for unlicensed electrical work by employees or contractors

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Phase 6: Pre-Settlement Confirmation

Complete these items in the week before settlement.

• Confirm the electrical contractor licence is still current (do a fresh check on the regulator's register)
• Confirm all key staff are still employed and have confirmed they're staying
• Confirm the commercial lease transfer or assignment is fully documented and the landlord has provided written consent
• Confirm all material commercial contracts have either been assigned or the customers have been notified and have consented
• Conduct a final walk-through of the premises, vehicles, and tool inventory to confirm no material assets have been removed
• Confirm the WIP schedule has been finalised for settlement adjustment purposes
• Confirm the aged debtors position as at settlement — any debtors you're assuming should be reflected in the final price or adjusted at settlement
• Confirm all superannuation payments are current up to settlement (any super owing becomes your liability as the new employer)
• Obtain the vendor's bank statements for the final month prior to settlement to confirm no unusual drawings or transactions

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Related resources:

• Full guide to due diligence for electrical businesses
• WHS due diligence checklist for trades businesses
• Electrical Business Buyer Checklist (the broader buying process)
• General business due diligence checklist