Due diligence on the sale of your business

Category: Corporate Finance - Posted On: Nov 5 2019

For every sale of a business, there will be a due diligence process – essentially a ‘health check’ of your business to ensure that there are no surprises for the buyer.

Even before you have found a prospective buyer, you should start to think about what questions they may ask about your business. If you were looking at buying a business, what would you want to know? The prospective buyer may have a lengthy list, but the most commonly requested information is:

  • Company and shareholder details – certificate of incorporation, shareholder agreements, share schemes.
  • Accounting and tax information – including year-end and management accounts, budgets, business plans and tax returns covering all applicable taxes.
  • Finance and banking – details of all banking, other loan and leasing arrangements.
  • Contracts and trading agreements – with both customers and suppliers, capital commitments, licences, franchise agreements etc.
  • Assets – a list of all assets and all appropriate documents, such as security structure, details of IT systems, networks and software used.
  • Intellectual property – details of all IP owned, disputes, infringements.
  • Insurance – details of all insurance arrangements, policies, claims made or outstanding.
  • Disputes – details of all ongoing or potential litigation or disputes.
  • Employment – list of employees and details of contracts of employment, retirement benefit schemes, loans, disciplinary procedures, claims or legal proceedings.
  • Health and safety documents – manuals, details of any breaches, claims.

Even if there is no sale imminent, it is good practice to take the time to get all these documents in order and ensure that they are up-to-date, which will allow you to respond quickly and be in a better position when it comes to a potential sale.

Always remember that before you provide any information to a third party, be sure to arrange a non-disclosure agreement to protect your own business interests.

Although the above is by no means an exhaustive list, it will help you to start thinking about the due diligence process for the sale of your business. Our EQ Corporate Finance team can support you through your company’s sale, or provide advice on ensuring you are prepared when the time comes. To speak to one our team, email corporatefinance@eqaccountants.co.uk or call one of our offices today.