What Is Due Diligence

Due Diligence - Hire A Business Broker

After an offer in the form of an LOI (letter of intent) has been accepted by the seller; the buyer will conduct due diligence.  In this phase, the buyer will have the opportunity to discover everything about the business. When I mean everything, I mean everything. 

You can watch the YouTube video here –

The buyer wants to make sure that what the seller is representing is actually true. What does this mean for the seller of the business. If the business was marketed honestly without fluff and misrepresentation then the due diligence should be smooth. 

The buyer of the business will need to review financial statements including tax returns and go line by line and expect an answer from the seller.  The buyer would also review client contracts, resumes of the employees/contractors, non-compete clauses with employees, possibly meet with key employees who are aware of the sale. Current leases, bank statements possibly going back 3 years, company corporate records, conduct a background check on the company and the list goes on and on. An appraisal for the business could also be requested at this time.

Important Takeaways

Due diligence process can drag on for months if not handled properly. It’s important to put a timeframe for this phase. We at GillAgency always provide 30 days to complete this so that both sides know they have a deadline.

When we represent a sale of the business we always advise our clients that they have to be honest and truthful upfront. Because if they don’t the truth will be uncovered during the due diligence process and eventually the deal will fall apart.

For more detailed information on what the due diligence really is, how to prepare for it before going to market, who is involved, head on over to our site


Blog Archives