Process
Due diligence is the buyer's detailed check of a company's finances, operations, legal matters and customers before the deal closes.
Due diligence is the period when a buyer verifies what you told them. Accountants, lawyers and the buyer's team review financial records, contracts, customers, employees, systems and legal matters.
For example, a buyer asks for three years of financials, top customer contracts and employee agreements. The team confirms each item, then reports any problems. A finding may lead to a price change or a new deal term.
Diligence matters because it is where deals change. Missing documents, messy books or surprise liabilities can lower price or end talks. Owners who prepare early move faster and keep more control.
Most sellers use a data room to share files in an organized way. A quality of earnings report often forms part of the work. Use the due diligence checklist for owners to get ready before the buyer asks.
Related terms
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