What is a due diligence questionnaire when buying a business?

A due diligence questionnaire is the buyer’s written list of what it wants to know and see about the business. BDC says that in due diligence the vendor provides comprehensive commercial, financial, legal and other information so the buyer can understand how the business works. A questionnaire is one way to put that request in writing.

Who prepares it and who answers

As the buyer, you decide what to ask. BDC says a buyer’s accountant can help analyze the company’s financial records and a buyer’s lawyer can conduct legal due diligence, so ask them what the questionnaire should cover. On the other side, BDC tells sellers that an accountant helps prepare the financial statements and other documents buyers typically ask to see, and that a lawyer supplies information to buyers during due diligence. Ask who will sign off on the seller’s answers.

How it is organised

BDC divides due diligence into commercial, financial and legal work, so a questionnaire could follow the same split. BDC also advises assigning tasks to the acquisition team with a clear deadline for each. One way to lay it out is to put each question under one heading, name the document that would answer it, and leave room for the seller’s response and a date. For the documents themselves, see what due diligence documents to ask for.

Why the written answers can matter later

BDC says the representations and warranties section of a purchase agreement is where the vendor formally describes the condition of the business and makes disclosures about issues it is aware of, and that in a separate indemnities section the parties agree on the ground rules for the compensation the vendor pays if disclosures turn out to be inaccurate or if covenants are not respected. Ask your lawyer whether the agreement refers to the seller’s answers, whether it limits the buyer to what is written in the agreement, and how disclosure schedules record exceptions. Keep every answer, dated, in one file.