The seller's due diligence checklist
What buyers will ask for in due diligence on a UK business sale, and how to assemble the diligence pack before they ask. A practical seller-side checklist.
Overview
Due diligence is the phase where a serious buyer's accountants and lawyers go through everything about your business in detail. For a typical UK SME sale, it runs 6 to 12 weeks between heads of terms and completion, and it is where the most deals fall through. Surprises kill sales; transparency keeps them alive.
The good news is that diligence is largely predictable. Buyers ask the same categories of questions on almost every deal. Preparing the answers in advance turns a stressful 8 weeks into a structured exercise, and signals to the buyer that the business is well-run.
Financial diligence
- Last 3 years of full accounts (signed)
- Last 12 to 24 months of monthly management accounts
- Trial balance and detailed P&L for the most recent year
- Detailed breakdown of revenue by customer, product, and channel
- Gross margin analysis by product or service line
- Bank statements for the trading account (last 6 to 12 months)
- Aged debtors and creditors reports
- VAT returns (last 8 quarters)
- Corporation Tax computations and confirmations of any HMRC enquiries
- Director loan account positions and any benefits in kind
Commercial diligence
- Customer list (top 20 by revenue, with relationship length, contract status, payment terms)
- Supplier list (top 20, with contract terms, dependencies)
- Marketing breakdown: where do leads come from, what is the cost per acquisition
- Competitor analysis from your perspective
- Any market research or sector reports you have commissioned
- Forward pipeline: pending orders, signed contracts not yet delivered, anticipated work
Legal and contractual diligence
- Articles of Association, shareholders' agreement, any options or warrants outstanding
- Lease(s), licence(s), franchise agreement(s)
- Material customer and supplier contracts (anything above 5% of revenue or strategically critical)
- Employment contracts and any restrictive covenants
- Open litigation, threatened litigation, settled disputes in the last 5 years
- IP register (trademarks, patents, registered designs, domain names)
- Any data processing agreements and GDPR documentation
- Insurance policies (cover, limits, claims history, any open claims)
Operational diligence
- Organisation chart with reporting lines
- Key personnel and their roles, contracts, restrictive covenants
- Operations manual or documented processes if any
- Health and safety policies and records
- Quality management system documentation if any (ISO, sector-specific)
- IT systems list with any data on dependency, age, replacement timeline
- Any planned or in-progress investment (capex commitments)
Compliance and regulatory diligence
- Sector-specific licences and registrations
- Most recent regulatory inspection report (CQC, Ofsted, FCA, etc.)
- Any open enforcement matters or notifications
- Anti-money laundering policy and any reports
- Modern Slavery Act statement if applicable (over £36m turnover)
Tax diligence
- Corporation Tax history (5 years) and HMRC correspondence
- VAT registration details and any partial exemption position
- PAYE / NI status, any open employer compliance reviews
- R&D tax credit claims history
- Capital allowance position
- Any open Group relief or other complex arrangements
Property diligence (if applicable)
- Title deeds for any freehold property
- Surveyor reports, condition surveys
- Energy Performance Certificate
- Planning history including any constraints or open conditions
- Environmental searches if relevant (especially manufacturing)
How to organise the pack
Three approaches.
DIY: structured Google Drive or Dropbox folder, indexed by section.
Data room software: Intralinks, Drooms, or Firmex (typically £500 to £2,000/month for a small SME deal).
Diligence platform: some brokers and accountants offer hosted diligence rooms as part of their service.
For most SME deals under £2 million, a well-organised Google Drive with read-only access is fine.
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Frequently asked questions
- How long does due diligence actually take?
- 6 to 12 weeks for a typical UK SME deal, longer for complex deals or regulated sectors. The most preparation-heavy is the first 2 to 3 weeks where buyers ask the most questions; thereafter it usually settles into specific clarifications and the lawyers taking over the contract drafting.
- What is the most common reason deals fall through in diligence?
- Discovery of something material that the seller did not disclose. Examples: customer concentration much worse than presented, an undisclosed dispute, a regulatory matter, a material owner-dependence the seller had downplayed. Honest sellers rarely lose deals in diligence.
- Should I show buyers everything they ask for?
- Yes, with sensible sequencing. Most diligence requests are reasonable. If a request feels excessive (e.g. very granular employee data before you trust the buyer), discuss timing with your solicitor; you can stage disclosure so the most sensitive information goes out closest to completion.
- Do I really need to prepare all of this before listing?
- No, you can build the pack during the listing-to-heads-of-terms phase (usually 4 to 12 weeks). But having the structural pieces ready (accounts, contracts, employment, lease) before listing makes the post-heads-of-terms phase much faster, and it signals quality to serious buyers.
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Browse businesses for sale →Last reviewed 29 May 2026