Diligence has a fearsome reputation it does not deserve. It is not an exam, and nobody expects perfection. Here is what actually gets checked, and how to be ready.
Due diligence is the buyer verifying that the business they agreed to buy is the business that exists. That is all. It protects you too: a buyer who has done the work properly does not come back renegotiating in month five, because there is nothing left to discover.
Do the numbers tie? Accountants will reconcile your reported profit to the bank statements, check how revenue is recognised, test the adjustments behind adjusted EBITDA, and look at how reliably profit turns into cash. Have ready: three years of accounts, monthly management figures, VAT returns and bank statements. If these all tell the same story, the financial workstream is quick.
Is the trading position what it appears? Customer concentration, contract terms and renewal history, pipeline, pricing, how you win work and who you lose it to. Expect a handful of carefully-handled customer reference calls late in the process, done with your agreement and without spooking anyone. A thoughtful buyer also spends real time with you and your senior people, because at this size the team is most of the asset.
Is everything owned and in order? Contracts, employment terms, property and leases, accreditations and certifications, any disputes, and the company’s own statutory records. Unresolved small things, an unsigned lease renewal, a missing share certificate, cause outsized delays, so sweep for them early.
The single most important thing to understand: disclosures do not kill deals, surprises do. Every business has warts, and experienced buyers have seen them all. An issue you raise early gets priced calmly or engineered around. The same issue discovered by an accountant in week ten reads as concealment, and it damages the one thing the whole process runs on, which is trust.
Mostly time, concentrated in the first few weeks of document gathering. Your own advisers, an accountant and a lawyer who have done deals before, are worth their fees many times over. And a practical tip that costs nothing: start a folder today with the documents named above. Owners who can produce clean records in days, not weeks, keep momentum, and momentum completes deals.
Tatu partners with the owners of UK service businesses making £500k to £3m a year in profit: money out today, a meaningful stake kept, and a bigger sale built together. See how it works, try the free valuation estimate, or write to nico@tatu-capital.com.