Can I get my due diligence costs back if the deal falls through?

A purchase can end after you have already paid advisers to review the business. Your lawyer and accountant were engaged by you, so you owe them for the work done, whatever happens to the deal. What you can control is how much you spend before you are sure, and whether anyone else agreed to share the cost.

Why the fees are usually yours

Advisers bill for time and work, not for outcomes. A report that uncovers a problem has done its job, even though the deal then dies. Whether the seller owes you anything if you walk away depends on the letter of intent and the law that governs it, so ask your lawyer. Assume the spending is gone unless a signed document says otherwise.

What the letter of intent can say

Cost-sharing and break-fee terms, if any, are negotiated when the letter of intent is drafted, not after trouble appears. A buyer might ask the seller to contribute if the seller withdraws or breaches exclusivity. A seller might ask for the same protection if the buyer walks away for no stated reason. Neither is automatic. Ask your lawyer how such a clause would work in your situation before you sign.

Stage the work to limit the loss

Order the review from cheapest to most expensive. Start with the listing package, public information and your own questions to the seller. Move to a first read of the financial statements next. Commission legal, accounting or specialist work only once those early checks hold up. If something fatal appears early, you stop having spent little. The guide to paying for due diligence covers budgeting.

• Ask each adviser for a fee estimate and a stopping point before you start.
• Hold back costly specialist work until the seller has agreed to exclusivity.
• Write down who pays for what in the letter of intent.
• Keep a record of which findings ended the deal.