LANDSCAPING · Q1 2026 · 36-item pre-LOI diligence checklist · 8 Critical · 12 High · 16 MediumMETHODOLOGY · Acquidex v1.0 · Anchored to AQX-IR-LSC-2026Q1 · Sample window 2025-05 → 2026-04 (trailing 12 months)CRITICAL 01 · Separate maintenance contract revenue from installation/enhancement revenue · EARNINGS QUALITY pillarCRITICAL 02 · Document H-2B allocation history and renewal pipeline · TRANSFERABILITY pillarCRITICAL 03 · Build monthly DSCR model through seasonal trough · FUNDABILITY pillarLIVE · Pre-LOI verifications a sophisticated buyer should clear before signing an LOILANDSCAPING · Q1 2026 · 36-item pre-LOI diligence checklist · 8 Critical · 12 High · 16 MediumMETHODOLOGY · Acquidex v1.0 · Anchored to AQX-IR-LSC-2026Q1 · Sample window 2025-05 → 2026-04 (trailing 12 months)CRITICAL 01 · Separate maintenance contract revenue from installation/enhancement revenue · EARNINGS QUALITY pillarCRITICAL 02 · Document H-2B allocation history and renewal pipeline · TRANSFERABILITY pillarCRITICAL 03 · Build monthly DSCR model through seasonal trough · FUNDABILITY pillarLIVE · Pre-LOI verifications a sophisticated buyer should clear before signing an LOI
Q1 2026 Landscaping Pre-LOI Diligence
The complete landscaping pre-LOI diligence checklist.
Every Landscaping acquisition verification a sophisticated buyer should clear before signing a letter of intent — grouped by category, tagged by pillar and severity, anchored to the Q1 2026 Landscaping Atlas.
critical Will cause SBA fall-through or a deal break if missed. Verify before LOI.
high Post-LOI repricing risk. Verify in the diligence period or accept the haircut.
medium Diligence-period verification. Will not kill the deal but compounds working-capital and post-close risk.
01
Category 01 · 3 items
Financial normalization
Separate maintenance contract revenue from installation/enhancement revenue
Why:Installation and maintenance revenue were co-mingled in 63% of deals reviewed. Maintenance is recurring and transferable; installation is episodic. Separating the two is the first step in any lender-grade SDE analysis.
Check:Revenue by service type (mowing, fertilization, irrigation, design-build, snow) · contract list with start/end dates · trailing 24-month revenue mix trend · installation backlog vs realized.
critical
Earnings Quality
Build monthly DSCR model through seasonal trough
Why:Annual DSCR averages mask Q4–Q1 cash-flow troughs where coverage can drop below 0.80× for 3–5 consecutive months. SBA lenders increasingly require monthly DSCR modeling for northern-climate operations.
Check:Trailing 24-month monthly cash flow · debt service schedule · seasonal trough month identification · snow removal cross-sell offset · working capital line draw history.
critical
Fundability
Add back owner-operator at full crew-leader / branch-manager replacement cost
Why:Owners performing crew-leader-level field work, account management, and bilingual crew supervision cannot be replaced at a $50K bookkeeper add-back. Replacement cost runs $78K–$115K loaded for combined account-manager / branch-manager scope.
Check:Owner time-allocation interview · whether bilingual crew leaders exist on staff · account manager market wage in metro · branch-manager scope separate from field hours.
high
Earnings Quality
02
Category 02 · 1 item
Labor & visa documentation
Document H-2B allocation history and renewal pipeline
Why:H-2B dependency above 20% appeared in 29% of deals with no documented renewal pipeline. Cap-lottery losses have caused documented revenue shortfalls of 20–35%; this is a post-close operational cliff that must be quantified.
Check:Prior 3–5 year H-2B application history with allocation dates and slot counts · ETA-9142B filings · prevailing wage determinations · agent / attorney relationship and renewal pipeline · domestic backup staffing plan.
Why:Equipment average age exceeded 8 years in 34% of deals. Commercial mowing equipment has 3–5K hour useful life; deferred capex requires capitalized reserve of 8–12% of revenue.
Check:Equipment list with VIN/serial, year, hours, lien status · replacement schedule · trailing 36-month repair spend · capitalized vs expensed maintenance · equipment loan amortization.
critical
Earnings Quality
Inspect specialty tooling and irrigation diagnostic equipment
Why:Irrigation diagnostic tools, soil moisture sensors, and chemical mixing/calibration equipment are forward capex if missing; calibration records are required for chemical-application services.
Check:Tool list · calibration certificates · in-shop chemical mix and rinsate equipment · irrigation diagnostic tooling per crew.
medium
Transferability
04
Category 04 · 3 items
Recurring revenue verification
Verify maintenance contracts are signed and assignable
Why:Recurring maintenance contracts are the foundation of upper-band placement; verbal / handshake arrangements do not transfer and create immediate post-close revenue risk.
Check:Signed contract files for top 80% of recurring revenue · assignment / change-of-control clause · auto-renewal terms · price escalation language · cancellation history.
critical
Pricing
Cohort-test maintenance contract retention monthly for 24 months
Why:Headline retention rates can mask churn timing; lenders increasingly require cohort data, not blended averages.
Check:Quarterly cohort retention table for trailing 24 months · contract start dates · CRM export of contract status by month · churn reasons.
high
Pricing
Pressure-test recurring revenue share against bank deposits
Why:Recurring revenue share is the dominant top-of-band Pricing determinant; presented share that does not reconcile to bank deposit categorization is a finding.
Check:Trailing 12-month bank deposit categorization · ACH file from billing system · reconciliation memo to General Ledger.
high
Pricing
05
Category 05 · 1 item
License & regulatory continuity
Verify state pesticide applicator licensing and EPA Worker Protection Standard compliance
Why:Commercial pesticide application requires state applicator certification; non-compliance is strict-liability under EPA Worker Protection Standard (40 CFR Part 170). Missing applicator license blocks chemical-service revenue post-close.
Check:State applicator certification per technician (commercial Category 3 / ornamental & turf typical) · expiration dates · EPA WPS training records · pesticide use logs · restricted-use product inventory.
high
Fundability
06
Category 06 · 2 items
Labor & technical capacity
Reconcile crew turnover and bilingual leader retention
Why:Bilingual crew leader retention is the single highest-leverage labor metric; turnover above 35% signals competitive labor market pressure or poor management culture.
Check:Trailing 24-month payroll tenure data · crew leader vs general crew turnover separately · bilingual coverage ratio (1 leader per 8–10 crew) · exit interview log if maintained.
high
Transferability
Reconcile 1099 contractor labor against subcontractor exposure
Why:Heavy 1099 use can trigger ABC-test or worker-classification audits (esp. CA AB5, NJ, MA) and inflates apparent labor margin while hiding employer tax exposure.
Check:1099-NEC totals 3 yr · per-contractor revenue dependence · scope-of-work agreements · workers comp coverage on 1099 entities.
high
Earnings Quality
07
Category 07 · 2 items
Pipeline & seasonal
Audit snow removal cross-sell and seasonal contract structure
Why:Snow removal is the primary Q4–Q1 trough offset for northern operators; per-event vs seasonal contract structure changes cash-flow profile materially.
Check:Snow contract list with structure (per-event / per-inch / seasonal) · trailing 3-year revenue and event frequency · subcontracted vs self-performed mix · equipment dedicated to snow.
high
Fundability
Reconcile commercial backlog and signed POs
Why:Multi-month installation backlog presented as forward revenue must be tested against signed POs and customer creditworthiness; verbal commitments do not survive due diligence.
Check:Backlog schedule with PO numbers · customer credit ratings · scheduled vs realized completion 24 mo · cancellation history.
medium
Pricing
08
Category 08 · 1 item
Customer concentration & mix
Verify route density and commercial customer concentration
Why:Route density drives commercial maintenance margin; commercial accounts above 15% of revenue, or single customer above 10%, materially alter Earnings Quality and Pricing.
Check:Top 20 customers by trailing-12-month revenue · route map by branch · crew utilization per route · multi-year trend in concentration · master service agreement terms.
high
Earnings Quality
09
Category 09 · 2 items
Insurance, bonding & warranty
Pull the workers compensation experience modifier (X-Mod)
Why:X-Mod above 1.0 signals injury frequency above industry average and predicts forward premium; landscaping carries class-code risk on equipment-related and chemical-handling exposure.
Confirm GL, professional liability, and umbrella coverage
Why:Standard GL alone does not cover chemical-application drift liability or property damage from large equipment; under-insurance flags forward premium increase or buyer-side gap coverage.
Verify supplier credit terms travel to the new entity
Why:Distributor credit lines (SiteOne, Ewing, John Deere Landscapes / SiteOne, Horizon) are personally guaranteed by the seller in many SMB deals; loss of terms post-close compresses working capital.
Check:Supplier statements with payment terms and credit limits · personal guarantee disclosures · written confirmation of post-close terms portability · annual rebate accrual.
medium
Transferability
11
Category 11 · 2 items
Real estate & lease
Read the shop and yard lease for change-of-control
Why:Shop, yard, equipment storage, and signage lease is the operational anchor; landlord assignment provisions and below-market rent (if landlord = seller) are common findings.
Check:Lease assignment / change-of-control clause · related-party indicator if landlord shares ownership · market rent comp · remaining term and option rights.
medium
Transferability
Phase I environmental on owned or controlled real estate
Why:Landscaping operations historically used pesticide and fertilizer storage, fuel UST/AST, and chemical mix areas; environmental finding can stop SBA financing on real-estate-included deals.
Check:Phase I ESA report (current within 12 months) · UST / AST records · chemical storage area inspection · pesticide rinsate and disposal documentation.
medium
Fundability
12
Category 12 · 2 items
Technology & operations
Audit field service / CRM software and data ownership
Why:LMN, Aspire, RealGreen contracts often have data-export and termination terms that constrain post-close transitions; loss of historical service history is an Earnings Quality continuity risk.
Check:CRM/FSM contract terms · data export rights · monthly active seat count · trailing 12-month uptime / outage log · API access · customer database completeness.
medium
Transferability
Map online review velocity and reputation footprint
Why:Google review velocity below 1 per month per branch is a demand-generation finding; sudden negative-review clusters predict commercial fall-out.
Check:Google Business Profile review trend · BBB complaints and resolution · trailing-24-month star-rating trajectory · response rate.
medium
Pricing
13
Category 13 · 2 items
Compliance & legal
Search lien filings, UCC-1s, and litigation history
Why:Mechanic's liens filed against the entity (or filed by the entity) signal commercial collection issues; unreleased UCC-1s on equipment block clean title at close.
Check:Secretary of State UCC-1 search · county-level mechanic's liens · PACER litigation search · state court docket search.
medium
Fundability
Identify Davis-Bacon, prevailing-wage, and Buy America exposure
Why:Federally funded jobs (school-district grounds, military housing, federal facility) trigger prevailing-wage requirements; non-compliance is a payback liability.
Check:Federally funded contract list · certified payroll records · DOL audit history · municipal prevailing-wage exposure separate from federal.
medium
Fundability
14
Category 14 · 1 item
Tax & entity
Review state sales tax nexus and labor/parts taxability
Why:Landscaping sales tax rules vary widely (TX taxes most maintenance; FL exempts agricultural / horticultural services with carve-outs; CA partial); errors compound at 4–8.25% of revenue.
Check:Sales tax returns 3 yr per state · taxability matrix by state for labor / chemicals / installation · audit notices or assessments.
medium
Fundability
15
Category 15 · 1 item
Working capital & balance sheet
Age accounts receivable and write-off trend
Why:Commercial-heavy operators carry 60–90 day AR; underestimating collectibility overstates working-capital target at close.
Verify Construction Business Act licensure (建設業許可) — 造園工事業 by prefecture
Why:Japanese landscaping contractors require a 造園工事業 license issued either by the prefectural governor (single-prefecture) or by MLIT (multi-prefecture). Operating outside the licensed scope or prefecture is a strict-liability finding under the Construction Business Act (建設業法).
Check:造園工事業 license certificate · governor- vs minister-issued classification · 一般建設業 vs 特定建設業 (specified, required for subcontracts ≥ ¥45M) · expiration and renewal status · 専任技術者 (technical engineer) on file.
Why:Commercial pesticide application in Japan requires 防除作業従事者 (certified pesticide applicator) certification at the technician level and entity-level reporting under 農薬取締法. Missing or expired certification voids commercial chemical-service rights and triggers MAFF penalty exposure.
Check:防除作業従事者 certification per technician · prefectural MAFF reporting status · pesticide use logs · 特定毒物 (specified poisonous substance) handling registration if applicable.
critical
Fundability
Re-cut financials under J-GAAP goodwill amortization
Why:J-GAAP requires goodwill amortization over up to 20 years (typically 5–10), unlike US GAAP impairment-only treatment. Trailing earnings presented under one regime systematically misstate the other; this is the single largest source of cross-border valuation error.
Check:Audited J-GAAP financial statements (損益計算書 P/L, 貸借対照表 B/S) · goodwill schedule with amortization period · accountant-prepared US-GAAP bridging memo · differences in revenue recognition for installation contracts.
critical
Earnings Quality
Verify consumption tax (消費税) treatment on installation vs maintenance revenue
Why:JP consumption tax sits at 10% standard / 8% reduced rate; landscape installation and maintenance are typically standard-rate but partial-period revenue and deferred-installation deposits create reconciliation gaps that compound at 10% of revenue.
Check:消費税申告書 (consumption tax returns) 3 yr · installation deposit liability schedule · invoice-system (インボイス制度) qualified invoice issuer registration number · 簡易課税 vs 本則課税 election.
high
Fundability
Pressure-test the long-term employment cost structure
Why:Japan's 終身雇用 (lifetime employment) convention and Article 16 of the Labor Contract Act make termination far harder than at-will US employment. Severance reserves, social insurance employer contributions (社会保険料 ~15% of wages), and statutory retirement pay obligations are often understated on US-style management accounts.
Check:退職金規程 (retirement allowance rule) · 退職給付債務 (retirement benefit obligation) calculation · 社会保険・労働保険 contribution rate per employee · 有期 vs 無期 employee mix · 技能実習 (Technical Intern Trainee) program participation if any.
high
Transferability
Map the relationship-banking structure and CoC consent rights
Why:JP SMB acquisitions typically rely on relationship-based regional bank financing (地銀 / 信金) rather than a national SBA-equivalent. Existing main-bank relationships (メインバンク) often hold change-of-control consent rights via loan covenant; loss of the relationship can compress working capital independent of credit metrics.
Check:Main-bank loan agreements with CoC clauses · personal guarantee (個人保証) by selling shareholder · relationship history with regional bank · 信用保証協会 coverage · post-close lender continuation letter.
high
Fundability
Inspect 商業登記 (commercial registry) and 印鑑証明 (seal certificate)
Why:JP corporate transactions require fresh 履歴事項全部証明書 (commercial register full extract) and 印鑑証明書 (registered seal certificate); outstanding director changes or unfiled capital actions are blocking findings at signing.
Check:法人登記簿謄本 (履歴事項全部証明書) issued within 3 months · representative director seal certificate · outstanding capital subscription receivables · prior M&A or capital actions on the registry.
medium
Fundability
Plan APPI-compliant customer-data transfer notification
Why:Japan's Act on the Protection of Personal Information (個人情報保護法 / APPI) requires customers be notified of any transfer of their personal data on M&A and granted opt-out rights; failure invites Personal Information Protection Commission (PPC) scrutiny and customer complaints.
Check:Pre-close APPI privacy-policy review · sample customer-notification letter · post-close notification campaign budget · PPC reporting protocol if material breach.
high
Transferability
Verify entity-level real-estate and land-use compliance for nursery / yard operations
Why:JP nursery, plant material storage, and chemical mix yard operations require zoning compliance under 都市計画法 (City Planning Act) and 農地法 (Agricultural Land Act) where applicable; non-compliance carries strict-liability findings on land use.
Check:用途地域 (zoning classification) · 農地転用許可 (agricultural land conversion permit) if applicable · prefectural land-use filings · environmental compliance for chemical storage.
medium
Fundability
Audit Building Standards Act compliance for hardscape installations
Why:Hardscape installations integrated with commercial buildings (retaining walls, drainage, planters above structural slabs) may trigger 建築基準法 (Building Standards Act) review; older installs often predate current code.
Check:建築設備検査報告書 filings if integrated with commercial buildings · structural engineer sign-off on hardscape elements · code-grandfathering memos for pre-2003 installations.
