Enduring the Due Diligence Phase

Selling a business and going through the due diligence phase is somewhat like going through a courtship when you are considering marriage. You have already established the fact that you like the idea of taking on the commitment; now you are just trying to learn as much as you can about the opportunity to make sure you didn’t miss anything big that could be a game changer.

It can sometimes be as emotionally challenging as a courtship as well, because you know that at any time the buyers may see something that rubs them the wrong way and they will drop the deal and walk away.

Being Detailed in Your Responses

During the due diligence phase, the buyer is trying to figure out all of the little details that will be an issue after or during the sale. It is important for the seller to recognize that these details are going to come out sooner or later, and the buyer is not going to make the acquisition until they do.

We have all heard the phrase, “The devil is in the details.” This is particularly true in the M&A world. When you look at the company up front it appears to have qualities that attract a buyer, but there are always questions, and a buyer will not make the acquisition until those questions are answered.

In fact, the buyer owes a fiduciary responsibility to investors to ensure that questions are answered and risk is assessed. Even if the buyer is able to avoid all of the legal issues, if the company falls apart and the invested dollars are lost, that buyer will lose his investors’ trust for future deals. The point is that the questions will be answered the long way or the short way, and if they are not answered the buyer may just walk away from the deal. So be detailed and responsive in the requests for information.

Being Responsive to Due Diligence Questions

Often times the business owner will not have all of the answers to the buyer’s questions. In such cases the seller will have to turn to third-party consultants to have the questions answered. Many businesses that enter the M&A market looking for an exit strategy have their own third-party accountants, lawyers, and consultants.

When these parties are engaged during the due diligence phase, they learn that their client is up for sale and realize that they may lose that client. In such situations many third-party consultants begin to do what they can to break the deal up. They are trying to keep their client and think that if the deal doesn’t go through, they will not lose that client.

If these parties would just realize that if they are extremely responsive and helpful during the process they would be viewed as essential to the business rather than obtrusive. Give the soon-to-be new owners a reason to keep you around rather than a reason to let you go the second the deal closes.

What Buyers Are Really Looking For

Behind every due diligence request is an underlying question that the buyer or their advisors are trying to answer. Understanding these questions helps sellers frame their responses more effectively and reduces the back-and-forth that slows deals down. Broadly speaking, buyers are assessing three categories of risk: financial, operational, and legal.

Financial due diligence focuses on whether the historical earnings are reliable and repeatable. Buyers want to understand the quality of revenue, the composition of costs, and whether the financial statements tell a complete and accurate story. This is why quality of earnings analysis has become such a standard part of the M&A process—it gives buyers an independent view of normalized earnings before they finalize their offer.

Operational due diligence examines whether the business can continue to perform after the ownership transition. Key management dependencies, customer concentration, supplier relationships, and technology infrastructure are all common focus areas. Sellers who have thought through these questions in advance—and can demonstrate that the business is not dependent on any single individual or relationship—move through this phase significantly faster.

Legal due diligence reviews contracts, litigation history, intellectual property ownership, regulatory compliance, and the corporate governance record. Gaps or surprises in this area are among the most common causes of deal re-trades or terminations. Proactive preparation of a well-organized due diligence tracker can prevent many of these surprises from arising at an inconvenient moment.

Organizing Your Information for a Smooth Process

One of the most practical things a seller can do before entering the market is to pre-organize the information that buyers will inevitably request. This means assembling financial statements, tax returns, customer contracts, employment agreements, intellectual property documentation, and corporate records into a structured virtual data room before the first buyer signs an NDA.

Sellers who wait until after a letter of intent is signed to begin gathering this information often find themselves overwhelmed during a period when they should be focused on maintaining business momentum. The due diligence request list published by experienced advisors provides a useful starting template for what to expect, and working through it in advance surfaces issues that are far easier to address proactively than reactively.

For a comprehensive view of how due diligence fits into the broader transaction timeline, the overview of the due diligence phase of an acquisition covers the key stages from kick-off to closing. If you are concerned about pacing, our discussion of rapid due diligence practices explains how well-prepared sellers can materially compress the timeline without sacrificing thoroughness.

When you are ready to take your business to market, our transaction preparation platform helps sellers organize their materials, anticipate buyer questions, and approach the due diligence phase with confidence rather than anxiety.

Frequently Asked Questions

How long does the due diligence phase typically last?

The timeline varies considerably based on deal complexity, the seller’s level of preparation, and the buyer’s internal processes. Simple transactions with well-organized sellers can complete diligence in four to six weeks. More complex deals—involving multiple entities, regulatory considerations, or significant litigation history—can extend to three to six months. Pre-organizing your data room before going to market is one of the most effective ways to compress this timeline.

What happens if the buyer finds an issue during due diligence?

Discovery of an issue does not necessarily mean the deal falls apart. Many issues are manageable through price adjustments, escrow holdbacks, seller representations and warranties, or indemnification provisions. The key is transparency: buyers are far more willing to work through disclosed issues than to discover undisclosed ones after signing.

Should the seller’s existing advisors be involved in due diligence?

Yes, but with clear expectations. Existing accountants, attorneys, and consultants are valuable resources for responding to diligence requests. However, sellers should communicate clearly that being cooperative during the process is in their long-term interest—both for preserving the deal and for maintaining the relationship with the new ownership after close.