Preparing for Buyer Diligence

Diligence Is Where Prices Change

Deals rarely die at the handshake; they die, or shrink, in the weeks after, when verification surfaces something the buyer did not expect. Almost every retrade traces to a surprise the seller could have disclosed or fixed early. The preparation goal is simple: nothing material in your business should be discovered rather than presented.

The Financial File

Buyers and their lenders will reconcile your statements to your tax returns and test every add-back. Prepare three years of financials that tie out, documentation for each adjustment you claim, revenue by customer, and honest working-capital history. If your books need cleanup, do it before listing; earnings restated during diligence are earnings discounted during negotiation.

The Legal and License File

Assemble the contracts, leases, licenses, and permits with their assignment and transfer terms flagged, because assignability gates closings. Where your industry restricts who can own or operate (licensed trades, practices, regulated categories), know the transfer mechanics cold; buyers increasingly arrive already understanding those rules, and a seller who does not looks unprepared in the negotiation that follows.

The Operating Reality

Expect questions about everything that depends on you personally: customer relationships, supplier terms, the license on the wall, the estimating only you can do. Buyers price transition risk, so shrink it in advance: documented processes, a second-in-command with real authority, key staff who will meet the buyer at the right moment, and your own realistic plan for the handoff period.

Run Your Own Diligence First

The cheapest advisor you will ever hire is the one who reviews your business the way a buyer will, before any buyer does. Whether that is your accountant pressure-testing the add-backs or counsel reading the change-of-control clauses, finding it first converts a retrade into a footnote. The buyer's checklist is not a secret; work it from your side of the table while the fixes are still yours to make.

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