A buyer or investor is not only purchasing financial performance, but also the risks, obligations, and future potential of a business. Each part of due diligence addresses a critical dimension of the deal.
Due diligence helps you determine whether the business’s financials reflect its actual performance. This prevents overpaying and ensures that revenue stability, cost structure, and working capital are properly understood before finalising a price.
Legal due diligence uncovers obligations that may not be visible during initial discussions—such as hidden liabilities, contract restrictions, unresolved disputes, or non-compliance risks. These issues could delay the transaction or create liabilities for the buyer.
Operational review highlights dependencies (e.g., single-supplier risks, key staff reliance), inefficiencies, and systems that may require investment post-acquisition. This ensures the buyer is aware of the real effort needed to sustain or grow the business.
Buyers use due-diligence findings to renegotiate price, adjust deal terms, request warranties, or structure earn-outs. Sellers use it to prepare documentation that minimizes surprises and increases buyer confidence.
Usually prepared by the accounting firm leading the DD
Jointly summarised by financial + legal teams, with input from consultants
Compiled by lead advisor — Big 4 or major M&A advisory firm
Red flags, financial adjustments, legal risks, operational weaknesses, deal blockers
Buyer and seller agree on valuation range, exclusivity period, and due-diligence timeframe.
Financial, legal, and operational due-diligence teams request documents and conduct interviews simultaneously to save time.
Advisors review documents, ask questions, analyze discrepancies, and validate assumptions.
Once the three reviews reach substantial completion, the lead advisor consolidates findings into a comprehensive report summarizing red flags, valuation adjustments, and deal risks.
Buyer revises the offer, asks for warranties, adjusts structure, or exits the deal if significant issues arise.
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