Strategic Aerospace and Defence Initiative Information Booklet

Eligibility requirements and approval process

Approval process (continued)

4. Due diligence review

The due diligence review involves a rigorous and in-depth analysis of the applicant and the project in order to validate the information in the proposal.

The review comprises a series of meetings with company managers, a review of additional supporting information and confidential discussions with external experts to ensure that financial assistance from SADI will result in the anticipated benefits to Canada. ITO officials will respect applicants' confidentiality requirements throughout the due diligence review.

ITO informs applicants that projects for which the due diligence review is satisfactorily completed will proceed to project approval. ITO and the company must have agreed on a repayment plan by this point.

If the results of the due diligence review do not support the conclusions of the assessment review, ITO will reject the proposal.

The SADI Proposal Preparation Guide provides detailed information on each of the main areas that ITO will investigate during the due diligence review and that, consequently, must be covered in the proposal. These are described briefly below.

Company capability

Financial resources

The proposal must clearly demonstrate that the applicant has, or can reasonably be expected to obtain, the financial resources to complete the project and achieve the stated economic benefits from the resulting technology.

During the due diligence review, ITO officials will examine historical financial information, the underlying assumptions and reasonableness of the company's financial projections, and the potential sources (internal and external) of any required financing.

This review is designed to identify the financial risks to both the successful completion of the project and delivery of the intended benefits. Any identified financial risks and corresponding mitigation strategies will be discussed and evaluated with company management.

Management expertise

The proposal must show that the applicant's management team has strengths in the core areas of project management, strategic, marketing and technology management, and financial planning and controls.

During the due diligence review, ITO officials seek to determine whether company management possesses the capability to complete the project and deliver the intended benefits as described in the proposal. In particular, ITO assesses the experience of key members of the management team and the company's plans to address any gaps in management capability.

Business plan

The proposal must demonstrate that the applicant has a clear plan to allocate the resources required to complete the project, that the project is integrated with the applicant's overall corporate strategy and that an effective marketing and distribution strategy, or technology insertion plan, is in place. The business plan must also provide market and financial projections.

During the due diligence review, ITO officials assess the risks inherent in completing the project and delivering benefits to both the applicant and Canada. The applicant is required to substantiate information contained in assumptions underlying the business plan and to provide third-party validation of the marketing and sales assumptions.

Technical expertise

The proposal must demonstrate that the applicant possesses, or can be reasonably expected to secure, the technological capability to achieve the stated objectives of the project.

To verify this during the due diligence review, ITO officials ask the company to provide information on its research and development track record, its current laboratory and equipment capacity, the knowledge and skills of the current technical team and its plans to address any gaps in expertise required to complete the project.

Feasibility of research and development

The proposal must demonstrate that the project is technologically feasible, setting out a plan that shows a clear understanding of the activities, resources and management processes required to ensure success. The proposal should also outline the technological risks and risk mitigation strategies.

During the due diligence review, ITO officials will ask the company to substantiate that the research and development is technologically feasible in relation to the current state of the development, the resources available for the work, the progress to date and the challenges remaining.

Expected outcomes and benefits to Canada

SADI aims to strengthen the Canadian economy and the competitiveness of the aerospace, defence, space and security sectors. The proposal must contain information that shows how the project will meet SADI's three objectives. In each case, the text must include details about how the company will measure the expected results.

During the due diligence process, ITO officials seek to verify that the company has realistically assessed the outcomes and benefits, and how they would be achieved. Officials also assess the commitment by research partners to increase the level of collaborative effort between them by, for example, developing new collaborations or taking an existing relationship to a new level to achieve a higher degree of knowledge and/or technology transfer.

Repayment negotiations

All SADI financial contributions are repayable. During the due diligence review, the applicant and ITO negotiate a repayment plan based on the standard available repayment options, as part of developing the draft terms of a contribution agreement .

Repayment may be conditional, based on a percentage of gross business revenues, or unconditional with fixed annual repayment amounts. A medium-risk project will likely have a repayment cap of 150 percent of the value of the SADI contribution over a repayment period of 15 years.

Entering into repayment negotiations does not imply that the project has been approved for funding.