Advisory
Company Due Diligence Services Before You Commit
Due diligence converts what a seller says into what a buyer can verify. It protects the price you pay, shapes the warranties you negotiate and frequently determines whether a transaction should proceed at all. B2B Mergers helps buyers, investors and sellers structure the process and work with qualified professionals.
Workstreams
The main areas of a diligence exercise
Scope should match deal size and risk. A small acquisition may need a focused financial and legal review; a control transaction usually needs all of the areas below.
Financial due diligence
Quality of earnings, revenue recognition, margin analysis, working capital, net debt, cash conversion and the reliability of management accounts against audited statements.
Tax due diligence
Direct and indirect tax positions, filings, assessments, disputes, transfer pricing and exposures that could pass to the buyer.
Legal due diligence
Corporate records, share ownership, charges on assets, material contracts, property, licences, litigation and regulatory compliance.
Commercial due diligence
Market size, competitive position, customer concentration, pricing power, pipeline quality and the durability of demand.
Operational and HR review
Capacity, supply chain, quality systems, key person dependence, employee terms, statutory dues and retention risk.
Technology and data review
Ownership of code and IP, licensing, infrastructure, cyber security posture and data protection compliance.
Checklist
Core document request list
Sellers who assemble these in advance shorten the process considerably and lose less value at the negotiation stage.
- Certificate of incorporation, constitutional documents and statutory registers.
- Shareholding pattern, share certificates, and any options or convertible instruments.
- Three years of audited financial statements and current management accounts.
- Income tax, GST and other statutory returns with assessment and dispute status.
- Twelve months of bank statements and details of all borrowings and charges.
- Top customer and supplier contracts, with revenue concentration analysis.
- Property title or lease documents and asset registers.
- Licences, registrations, approvals and environmental or sector clearances.
- Employee list, contracts, payroll records and statutory contribution proofs.
- Details of litigation, notices, claims, guarantees and contingent liabilities.
- Intellectual property registrations and assignment documents.
- Related-party transactions and any agreements involving promoters or their families.
Red flags
Findings that change price or stop a deal
Not every issue is fatal. Most are managed through price adjustment, indemnities, escrow or conditions precedent, provided they surface before signing.
- Management accounts that do not reconcile with tax and bank records.
- Revenue concentrated in one or two customers without written contracts.
- Undisclosed borrowings, personal guarantees or charges on assets.
- Unpaid statutory dues such as tax, provident fund or employee contributions.
- Disputed or unclear ownership of shares, land, brands or code.
- Pending litigation or regulatory notices not disclosed at the outset.
- Profit dependent on one-off items, related-party sales or unsustainable pricing.
- Key licences expired, non-transferable or tied to the departing owner.
- Employee dues, gratuity or end-of-service liabilities not provided for.
- Post-closing performance entirely dependent on the outgoing promoter.
Process
How a diligence exercise typically runs
- 1Agree scope, materiality thresholds, timeline and advisor roles.
- 2Execute confidentiality arrangements and open a controlled data room.
- 3Issue the information request list and track responses.
- 4Review documents and raise follow-up queries in structured rounds.
- 5Hold management interviews and, where relevant, site visits.
- 6Verify third-party evidence such as bank, tax and registry records.
- 7Report findings with quantified impact and recommended mitigation.
- 8Translate findings into price adjustments, warranties, indemnities and conditions.
- 9Confirm conditions precedent are satisfied before closing.
- 10Carry unresolved items into the post-closing integration plan.
Diligence supports judgment, it does not replace it
When you need it
Situations where company due diligence is essential
Due diligence is not only for large mergers. Any decision that transfers money, ownership or long-term obligation deserves independent verification of the company on the other side.
Before buying a company
Confirm that reported profit is real, that assets are owned free of charges, that licences transfer, and that no undisclosed tax, employee or litigation liability comes with the business.
Before selling a business
Vendor due diligence surfaces issues while you still control the timetable, protects your asking price and prevents late renegotiation by the buyer.
Before investing in a stake
Verify the cap table, shareholder agreements, governance rights, related-party transactions and use of funds before subscribing to shares.
Before signing a contract or agreement
Check incorporation status, signing authority, financial standing, charges, disputes and compliance history of the counterparty before committing to supply, distribution or franchise terms.
Before a merger or takeover
Assess integration risk, overlapping contracts, competition and regulatory approvals, key-person dependence and cultural fit alongside the numbers.
Before a joint venture or partnership
Understand the partner's other commitments, funding capacity, IP ownership and exit rights before capital or technology is contributed.
Scope options
Levels of due diligence support
Cost and depth should be proportionate to deal value and risk. Most enquiries fall into one of these three levels.
Company background check
Corporate existence, directors and shareholders, charges, filings, litigation search and basic financial standing. Suitable before signing a supply, distribution or franchise agreement.
Focused financial and legal review
Quality of earnings, tax filings, borrowings, key contracts and statutory dues for a small or mid-sized acquisition or stake purchase.
Full transaction diligence
All workstreams with a data room, management interviews, site visits and a report that quantifies findings for price adjustment, warranties, indemnities and escrow.
Outcome
What a diligence report gives you at the negotiating table
- A normalised earnings figure you can defend when arguing price.
- A quantified list of liabilities to deduct from enterprise value.
- Specific indemnities drafted around real, identified exposures.
- Escrow or holdback amounts justified by evidence rather than instinct.
- Conditions precedent that must be satisfied before you release funds.
- A clear record of what was disclosed, protecting you after closing.
- An integration list of issues to fix in the first ninety days.
- The confidence to walk away early when the risk is not priceable.
Diligence FAQ
Due diligence: frequently asked questions
How long does due diligence take?+
A focused review of a small business can be completed in two to four weeks. Mid-market transactions with full financial, tax, legal and commercial workstreams commonly run four to ten weeks, depending on how quickly information is provided.
Who pays for due diligence?+
The buyer or investor normally pays for their own diligence. Sellers sometimes commission vendor due diligence in advance to speed up the process and reduce the chance of late price reductions.
What is vendor due diligence?+
A seller-commissioned review carried out before going to market, so issues are identified and addressed early and buyers receive a consistent, credible information base.
Can I skip diligence if the seller is known to me?+
Familiarity does not verify tax exposures, charges on assets, employee dues or contract terms. Even a reduced-scope review is far cheaper than an undisclosed liability discovered after closing.
What happens if diligence uncovers problems?+
Common responses are a price reduction, a specific indemnity, an escrow holdback, a condition to be satisfied before closing, a change in deal structure, or withdrawal where the issue is fundamental.
Guides
Read before your diligence engagement
Due Diligence Checklist Before Buying a Business
The financial, tax, legal, commercial and operational checks and documents to request before signing a share purchase or business transfer agreement.
Read the guide →Red Flags Found in Company Due Diligence
Unrecorded liabilities, customer concentration, related-party revenue and statutory gaps, and how each one reprices a deal.
Read the guide →