What to Expect and When It Begins

Due diligence formally launches once you share your Confidential Information Memorandum (CIM). Buyers will first conduct ad hoc diligence—asking high-level questions about your financials, operations, and customer metrics—then proceed to detailed, confirmatory diligence, where they audit every data point down to the granular level.

Key Do’s and Don’ts

To navigate the process efficiently and preserve strategic leverage:

• Do centralize all documents in a secure data room, ensuring consistency and version control.
• Don’t indulge every buyer request; prioritize according to the diligence checklist provided by your banker.
• Do respond promptly and work from the same information base to avoid confusion.
• Don’t interact directly with buyers outside of structured meetings—let your advisor manage all communications.
• Do keep track of how much diligence each bidder has completed, as deeper engagement correlates with deal commitment.

Founder’s Due Diligence Checklist

Preparing materials early reduces risk, minimizes business distraction, and accelerates closing:

1. Financial Statements: Monthly P&L, balance sheet, cash flow in Excel, with clear reconciliations.
2. Customer and Revenue Metrics: Top-customer analyses, contract terms, churn and retention dashboards.
3. Operational Documents: Key supplier agreements, IP assignments, organizational charts.
4. Legal Records: Corporate charters, board minutes, material litigation summaries.
5. Management Presentations: Consistent narrative deck aligned to CIM data.

Managing Price Adjustments and Closing Cash Proceeds

Even after signing the purchase agreement, purchase price adjustments (e.g., net-working-capital or debt pay-down) can materially impact your closing cash. Anticipate common adjustments—most skew downward—and build sufficient buffers into your target valuation. Your advisor will model likely scenarios to prevent surprises at closing and protect your ultimate proceeds.

Keeping Focus and Building Confidence

By assembling complete, accurate materials and adhering to best practices, founders transform a stressful phase into a competitive advantage. A disciplined, founder-centric approach to due diligence not only preserves deal value but also signals confidence to buyers—driving smoother negotiations and a higher likelihood of closing on optimal terms.

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