Preparing for Due Diligence: What to Expect

When it comes to selling your business, due diligence is a pivotal milestone in the process. It can make or break a deal. At BusinessExits.co.uk, we help business owners navigate this crucial stage with confidence and clarity, ensuring the best possible outcome.

What Is Due Diligence?

Due diligence is the buyer's opportunity to verify all aspects of your business before finalising the purchase. It typically follows the signing of Heads of Terms (HoTs) and is intended to confirm that what the buyer believes they are buying matches reality. This process covers legal, financial, operational, and commercial elements.

Buyers want to ensure they are not inheriting hidden liabilities or overpaying for risks. The more prepared you are, the smoother the journey, and the stronger your position in final negotiations.

Areas Typically Reviewed in Due Diligence

1. Financials – Accounts, tax filings, cash flow, working capital, stock, and debt positions.

2. Legal – Shareholder agreements, contracts, intellectual property, licences, and any litigation.

3. Commercial – Customer concentration, market position, suppliers, pricing models.

4. Operational – Staff contracts, key processes, IT systems, premises, and compliance.

5. Tax – Historical and current tax liabilities, HMRC status, VAT compliance, payroll.

6. Environmental or Sector-Specific – If relevant, regulations or compliance issues unique to your sector.

How to Prepare for Due Diligence

Start early. A clean, well-documented business gives buyers confidence and reduces the chance of deal fatigue or renegotiation. Here are some key steps:

• Financial Housekeeping: Ensure your books are up to date, and that all income, expenses, and liabilities are clearly recorded.

• Legal Review: Review shareholder agreements, client contracts, leases, and ensure IP is protected.

• People & HR: Confirm staff contracts are in place, with clear terms and compliance with employment laws.

• Data Room Creation: Organise key documents into a secure online folder that can be shared with the buyer’s advisers.

Common Pitfalls to Avoid

• Inconsistent or unclear financial records

• Missing contracts or undocumented agreements

• Staff issues or compliance gaps

• Undisclosed liabilities or disputes

Any red flags can derail or delay the deal. Being transparent and proactive builds trust.

How We Help

At BusinessExits.co.uk, we support our clients through the full sale process, including preparation for and management of due diligence. We work closely with your accountants, legal advisers, and team to ensure you're ready before the buyer's questions land.

We’ve seen deals collapse over issues that could have been resolved early with better preparation. Our role is to help protect value, maintain momentum, and keep the deal moving forward.

Ready to Sell? Let’s Talk.

If you're considering selling your business, start with a confidential conversation. We’ll assess your goals, explain your options, and help you understand what a successful exit might look like for you.

Contact us today to take the next step.