By the time a buyer starts due diligence, you've usually agreed a price and signed heads of terms. It can feel as if the hard part is done. For a lot of owners it's the most tiring part of the sale, because it lands on top of running the business and the questions keep coming.
It goes better if you know what's coming. This guide explains what buyers check when you sell a business in the UK and how to get ready, and ends with a checklist of what to gather.
What due diligence is for
A buyer agrees heads of terms on the strength of what you've told them and the figures they've seen. Due diligence is how they check it. They want to confirm that the profit is real and will carry on, and to find any problems while they can still do something about them.
Most buyers aren't looking for a reason to walk away. They're looking for surprises. A problem you mention early is usually just a point to negotiate. The same problem found late by the buyer's accountant can look like something you were hiding, and that's when prices change.
Who does what
- The buyer's accountants rebuild your profit from your records and check the tax. You'll sometimes hear this called a quality of earnings review.
- The buyer's solicitors send a questionnaire, often a long one, and go through the company's records, contracts, property and staff.
- The buyer themselves look at the commercial side, such as your customers, your market, your team and how the business would fit with anything else they own.
- Specialists come in where there's a reason to, such as a surveyor for the premises or someone to look at your IT.
- A lender funding the buyer may want its own reports, or to rely on the buyer's.
Financial and tax due diligence
The buyer's accountants will want to see how your profit is made. Expect questions on these.
- At least three years of accounts and the current year's management figures, and how they tie together.
- The adjustments you've made to show the profit a new owner would earn, with evidence for each.
- Revenue by customer, and how much of it depends on the biggest few.
- The money tied up in day to day trading, such as stock, what customers owe you and what you owe suppliers.
- Borrowing, finance agreements, loans from directors and anything owed to HMRC.
- Corporation Tax, VAT and PAYE, and any enquiries or disputes with HMRC.
A limited company must keep its accounting records for six years from the end of the financial year they relate to, so the records should exist. Whether they're easy to find is another matter.
Legal due diligence
The legal side starts with the company itself. The buyer's solicitors will check the articles, the register of members, the board minutes and the filings at Companies House. Since 18 November 2025, companies no longer have to keep their own registers of directors or of people with significant control, but the details held at Companies House must be right. Gaps are common, and they're easy to fix if you start early.
Then they'll look at what the business has agreed with other people. Read your main customer and supplier contracts for clauses that let the other side end the contract if the company changes hands. Check whether your lease needs the landlord's consent to the sale. Make sure the company owns the rights to its name and website, including anything a freelancer designed or built.
Your team gets close attention. The buyer will want contracts, pay, bonus arrangements and right to work records. Employers must keep copies of right to work documents for as long as someone works for them and for two years after. If the sale is of the business and its assets rather than the company's shares, staff usually transfer to the buyer under the TUPE regulations, which bring their own duties to inform and consult.
Personal data needs care
A lot of what a buyer asks for includes personal data, such as salaries, staff records and customer lists. Data protection law still applies during a sale. The Information Commissioner's Office covers mergers and acquisitions in its data sharing code, and says the data protection principles must be followed when personal data changes hands. In practice, that means sharing only what the buyer needs at each stage.
Staff details are usually shared without names to begin with, and customer names only once the deal is close, all under a confidentiality agreement. If the buyer is a competitor, ask for the most sensitive information to go to their advisers rather than to their managers.
How to get ready before a buyer asks
- Do your own review first. Ask your accountant and solicitor to run a lighter version of the buyer's checks before you go to market. Problems you find yourself can be fixed or explained on your terms.
- Set up a data room. This is a secure online folder, with an index that follows the order of the buyer's likely questions.
- Fix what you can. Missing or unsigned contracts, out of date registers, staff without written contracts and a lease close to its end are all easier to sort out now.
- Keep a log. Record every question and every answer, so nothing is answered twice or two different ways.
- Pick one person to run it. If that's you, plan for the time it takes, and think about who will cover your day job.
What happens to what the buyer finds
Due diligence feeds straight into the contract. If the buyer finds a problem, they may ask for the price to come down, or for part of it to be held back for a time in case the problem costs them money. Our guide to earn-outs and deferred consideration explains how money paid later works. They may also ask for an indemnity, which is a promise to cover a specific risk pound for pound.
Then there are the warranties, which are statements you make about the business in the sale agreement. You protect yourself against claims under them in the disclosure letter, which lists anything that would otherwise make a warranty untrue. Disclose fully and specifically. Buyers often resist general statements that everything in the data room counts as disclosed.
A due diligence checklist for sellers
Every buyer's list is different, and a business in a regulated sector will have more to add. These are the documents most buyers ask for, grouped the way their questionnaires usually are. Gather what you can before you go to market.
The company
- Certificate of incorporation and any change of name certificates
- Articles of association and any shareholders' agreement
- Register of members, and up to date details of directors and people with significant control at Companies House
- Board and shareholder minutes
- Confirmation statements and other Companies House filings
- Share options, loans to or from directors, and any charges over the company's assets
Accounts and finance
- Statutory accounts for at least the last three years
- Monthly management accounts for this year and last year
- This year's budget or forecast, and what it assumes
- A list of adjustments to profit, with evidence for each
- Aged lists of what customers owe and what you owe suppliers
- Bank, loan, overdraft, hire purchase and leasing agreements
- A list of the business's equipment and vehicles
Tax
- Corporation Tax returns and computations
- VAT returns and PAYE records
- Correspondence about any HMRC enquiry, penalty or payment plan
- Details of any tax reliefs claimed, such as for research and development
Customers and suppliers
- Revenue by customer for the last three years
- Your main customer and supplier contracts, and your standard terms
- Any contract that can end if the company changes hands, or at short notice
Property
- Leases, licences and side letters, or title deeds if the company owns property
- Rent review history and any claims for repairs at the end of a lease
- Planning permissions, fire risk assessments and health and safety records
Your team
- A staff list with role, start date, pay, hours and notice, without names at first
- Standard employment contracts, the staff handbook and policies
- Contracts for directors and senior managers
- Bonus, commission and share schemes
- Right to work records
- Workplace pension scheme details and records of your pension duties
- Grievances, disciplinary cases and any tribunal claims
- Contractors and agency staff
Licences, insurance and regulators
- Licences, registrations and permits the business needs to trade
- Recent inspection reports and correspondence with regulators
- Insurance policies and a claims history
IT, data and intellectual property
- Trade marks, domain names, and who owns the website and any software
- Agreements with anyone who designed or built something for the business
- Main IT systems and software licences
- Data protection policies, privacy notices and any record of data breaches
Disputes
- Current, past and threatened claims, by or against the business
- Complaints that could turn into claims
If you're still at the stage of deciding when to sell, our guide to how long it takes to sell a business explains where due diligence fits in the timetable, and how to sell a business covers the whole process.