Due diligence

Diligence usually begins after an LOI is signed and runs for several weeks to a few months, depending on the size and complexity of the business. The buyer is not looking for perfection. They are looking for the gap between how the business was described and how it actually is, and for anything that would change the price or the structure.

What gets examined

• Financial: statements and tax filings going back several years, bank records, receivables ageing, add-back evidence
• Legal: corporate records, the lease, customer and supplier contracts, litigation, security registrations
• Employment: contracts, entitlements, length of service, key-person risk, any union agreement
• Regulatory: the licences and permits the business runs on, and whether they survive a change of ownership
• Operational: equipment condition, inventory, systems, and how much of the business lives in the owner’s head

What findings actually do

A diligence finding rarely kills a deal outright. More often it moves the price, adds an indemnity, creates a holdback against a specific risk, or turns into a closing condition the seller has to satisfy first. Deals collapse when a finding suggests the seller knew and did not disclose — because at that point the buyer stops trusting everything else.