What is due diligence?
The buyer's verification of everything you have claimed. It typically runs six to twelve weeks, and its purpose is to find reasons to adjust the price you already agreed.
The buyer's systematic verification of everything you have told them, usually after heads of terms are signed and before completion. It runs six to twelve weeks for an SME transaction.
What is examined
| Area | What they are looking for |
|---|---|
| Financial | Whether the earnings figure survives reconstruction |
| Commercial | Customer concentration, contract terms, renewal dates |
| Legal | IP ownership, employment terms, litigation, change-of-control clauses |
| Tax | Historic exposure the buyer would inherit |
| Operational | Whether the business runs without you |
What it is really for
Two things. Confirming the business is what was described — and finding grounds to adjust the price. Both are legitimate, and pretending only the first exists is how sellers get surprised in week eight.
How to survive it well
Disclose early, including the things you would rather not. Have three years of reconciled accounts, evidence for every add-back, contracts in one folder, and IP assignments from every freelancer who ever touched the product.
The preparation that makes due diligence painless is the same preparation that raises the price beforehand — see preparing your business for sale and what buyers look for.