A buyer due diligence checklist for a Canadian business purchase should cover four areas beyond the financial, legal, employment and lease documents themselves: how the process is set up and scoped, commercial and customer risk, physical and technology assets, and the questions a standard document request tends to miss.
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This checklist sets up how a buyer runs due diligence on a Canadian small or medium business purchase — the process itself, plus the commercial, asset and technology risks that sit outside the other checklists covering financial records, legal documents, employment records and the lease. Use it early, before requesting a single document, so the process has structure from day one rather than becoming a disorganized pile of files nobody has time to read properly.
Set up the process before requesting records
Line up a lawyer and an accountant before the seller opens the data roomReviewing financial and legal records without professional advisors on the file leaves red flags undiscovered until it is too late to renegotiate around them.
Get a signed non-disclosure agreement in place before receiving sensitive dataA seller who shares detailed financial or customer information before any confidentiality agreement is signed, or who refuses to sign one at all, is worth pausing on.
Put a written diligence scope and timeline in front of the sellerAn open-ended process with no agreed end date lets a motivated seller run out the clock on a buyer who has not locked in exclusivity or a target closing date.
Decide early whether the deal will be structured as an asset purchase or a share purchaseThe structure changes which records actually matter, since a share purchase inherits the corporation’s entire history and a typical asset purchase does not.
Assess commercial and customer risk
Calculate what share of revenue comes from the largest few customersA red flag is a business where a small number of accounts make up most of the revenue and none of them are under a written, transferable contract.
Ask how much of the business runs through the current owner’s personal relationshipsA business that depends on the owner personally knowing every key customer or supplier can lose meaningful value the moment that owner leaves.
Look at competitive position and market share trend over several years, not just the most recent oneA single strong year of results can mask a business that has been steadily losing ground to competitors for a while.
Confirm whether major suppliers have exclusive, at-will or contractually protected arrangementsA supplier who can walk away on short notice, or who has never put the relationship in writing, is a risk to price into the deal rather than discover afterward.
Check physical assets, technology and environmental exposure
Physically inspect major equipment and ask for maintenance and service recordsEquipment that 'still works fine' but has no documented service history and looks past its expected working life often needs replacing sooner than the seller suggests.
Review the technology stack, software licences and how customer data is storedUnlicensed software or a customer database with no clear privacy practices in place becomes the buyer’s problem the moment the deal closes.
Ask directly whether the business or its premises have any history of environmental issuesPrior fuel storage, dry cleaning, auto repair or other industrial use can carry contamination liability that survives a change of ownership.
Confirm what cybersecurity and data-handling practices are actually documented, not just describedAsk for evidence — a written policy, an incident log, proof of backups — rather than accepting a verbal assurance that everything is fine.
Cover what a standard document request tends to miss
Ask the seller directly whether there is anything you should expect to be surprised byIt is a blunt question, but a seller who answers evasively or goes quiet is telling a buyer something worth following up on.
Confirm current insurance coverage and ask whether a claims history is availableA lapsed policy, thin coverage or a pattern of past claims all change what a buyer should expect insurance to cost going forward.
Build revisiting time into the schedule for when an earlier finding gets complicated by a later oneDue diligence is iterative — a document that raises a new question in week three should reopen an item that looked closed in week one.
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