Diligence is how both sides get to a deal they can trust.
For buyers
Go deal-breakers first, hire a CPA and attorney, spend time inside the business, and write down in advance what would make you walk away.
For sellers
Prepare before you list, disclose problems early, respond quickly and keep the business running at full strength during the process.
Go deeper
- Business due diligence guide
- Financial due diligence
- Legal due diligence
- Operational due diligence
- Red flags
- Business acquisition process
Talk it through
If you’re buying or selling in South Carolina, talk to Ben about acquisitions. For help tightening operations before a sale, see Ben’s business strategy work.
Straight answers
How long does due diligence take when buying a business?
It depends on size, complexity, record quality and lender requirements. The letter of intent usually sets the diligence period. Organized sellers shorten it.
What documents are needed for due diligence?
Tax returns, financial statements, bank statements, the general ledger, agings, payroll and customer reports, contracts, leases, licenses, entity records and insurance. See business due diligence.
What is a quality of earnings report?
An independent accounting analysis of reported earnings, adjustments and working capital. See financial due diligence.
What legal issues should buyers check?
Contracts and assignability, leases, litigation, licenses, employment, IP, liens and taxes. See legal due diligence.
When can buyers talk to employees and customers?
Only with the seller’s agreement, usually late in the process and carefully staged to protect confidentiality.
What are the biggest red flags?
Unreconciled books, concentration, owner dependence, undisclosed liabilities and a seller who resists diligence. See red flags when buying a business.
Are there South Carolina-specific diligence issues?
Yes. Under SC Code §12-54-124, a seller’s unpaid state taxes can become a lien on transferred assets unless the buyer obtains a DOR certificate of compliance within the required window before closing. Ask your attorney.
Can due diligence change the price?
Yes. Findings can lead to price adjustments, structure changes, protections in the purchase agreement or walking away.