Business acquisition due diligence

Start with a scoped document request

Tell the seller what you need, why you need it and who will have access. Separate a public teaser from confidential evidence. A data room can organise the work, but an uploaded document does not establish that its content is correct. Assign each material issue to an adviser or decision-maker.

Reconcile the numbers

Compare annual accounts, management figures and supporting records. Investigate changes in margins, debtor collection, stock, capital expenditure and customer concentration. Ask which earnings depend on the current owner and whether their replacement is costed.

• Revenue quality and customer dependence.
• Debt, security and working capital requirements.
• Tax filings and potential historic exposures.
• Leases, licences and contract transfer restrictions.

Check the people and legal structure

Use Companies House to identify the entity, officers and registered charges, then verify the position using current transaction documents. Review employment terms, disputes, intellectual property and change-of-control provisions. Consider whether employee-transfer rules apply to the proposed structure.

Turn findings into decisions

Keep an issue list with evidence, an owner, a proposed treatment and a deadline. A finding may change the price, require a warranty, need a consent or stop the transaction. Decide with advisers before signing; an attractive multiple is not a substitute for resolving a material risk.