What Is Due Diligence When Selling a Business?

Due diligence is the buyer's detailed check of your business before completion. It covers your finances, customers and contracts, people, property, legal and tax affairs, and health and safety. Being organised before it starts is the single best way to keep a sale on track.

Once you've agreed headline terms with a buyer, due diligence begins. For many owners it is the most demanding part of a sale, but it holds few surprises if you prepare.

What does a buyer check?

• Finances: statutory and management accounts, forecasts, debts, cash flow and working capital
• Customers and suppliers: key contracts, how concentrated sales are, and terms of trade
• People: employment contracts, key staff, pensions and any disputes
• Property and assets: leases, ownership of equipment and the condition of key assets
• Legal and compliance: company records, licences, accreditations, insurance and any claims
• Tax: returns, payments and any open enquiries
• Health, safety and environment: policies, records and incidents

How long does due diligence take?

Usually several weeks to a few months, depending on the size of the business and how quickly information can be supplied. A well-organised data room, with documents ready before they're asked for, makes the biggest difference.

How do I prepare?

Start gathering documents early and keep them in one place. Fix small issues before a buyer finds them: chase unsigned contracts, update policies and make sure company records are current. Be open about anything difficult — buyers deal with problems far more easily when they hear about them early.

Will my staff find out?

Due diligence can usually be handled confidentially, with only a few trusted people involved. Agree with the buyer when and how employees, customers and suppliers will be told.

How Wolfgang Capital handles due diligence

We work collaboratively with owners and their advisers, ask for information in a clear order and focus on what matters for the long-term future of the business. We put confidentiality agreements in place before any detailed information is shared.

This article is general guidance, not financial, tax or legal advice. Always take independent professional advice before selling.