What is the difference between preliminary and confirmatory due diligence?

Buyers review a business in two passes, and they ask different things. The first pass decides whether the business deserves your time and an offer. The second checks, with evidence, that what you heard is accurate. Knowing which pass you are in tells you what to ask for, what a seller will reasonably share, and how much weight to give what you learn.

The first pass, before an offer

Preliminary work is light and cheap. You read the listing package, look at the business online, visit as a customer if that is possible, and ask the seller your first questions. Public information about the business and its industry helps too. A seller will usually share summaries at this stage, not full records. The aim is to rule the business in or out.

The second pass, after a letter of intent

Once a letter of intent is signed, confirmatory work begins. You ask for the underlying records, such as financial statements, contracts, leases and employee information, and your advisers check them against what you were told. Sellers share far more at this point because you have shown commitment and usually signed confidentiality terms. The page on when due diligence starts explains the timing.

Keeping early findings in their place

A preliminary finding is a lead, not a fact. A number in a summary may not survive a close look at the records. Write down what you were told, by whom and when, and list it as something to confirm. Then carry each item into the second pass and mark it confirmed or not. Never rely on a first impression when the documents say something else.