If you’re thinking about buying a business, entering a joint venture, or investing in another company, due diligence is your best friend. It isn’t about confirming that every number is 100% accurate. Instead, it’s about shining a light on what matters most – the risks, the red flags, and the deal breakers you might otherwise miss.
So, what *is* due diligence?
It’s a financial investigation, yes. But it’s also a deep dive into the inner workings of the business. It covers key financial and non-financial information, and is tailored to suit your specific situation. There’s no cookie-cutter approach here. Together with your advisers, you decide where to focus. The goal is to highlight the risks that could affect your decision to move forward, walk away, or renegotiate.
Why is it so important?
From our experience, due diligence often changes the outcome of a deal:
- Around 40% of deals are restructured after findings
- Another 40% are abandoned altogether
- Only 20% go ahead unchanged
It can reveal hidden liabilities, inflated asset values, unrealistic forecasts, or even looming tax and legal issues. It also helps your legal team prepare proper warranties and indemnities, reducing your risk further.
And it’s not just about risk. Done well, due diligence can also support smoother integration post-deal – saving you time, money, and hassle down the line.
Key areas to focus on in today’s climate:
- ESG reporting: Increasingly important, especially in regulated or high-profile sectors
- Cash flow resilience: Can the business weather another supply chain issue?
- Disaster recovery: Is the business vulnerable to floods, cyber attacks, or supplier dependency?
- Succession planning: What happens if key people leave or retire?
- Tax and pensions: What happens if the rules change?
Your core due diligence team should include people with experience across sectors and specialisms. They’ll help you identify where to look deeper and when to bring in other experts.
At SBCA, we work with clients to reduce risk and improve outcomes during high-stakes transactions.
Thinking of buying, investing, or entering a partnership? Send us an email to prosper@sbca.co.uk or call 01772 204102 to find out how we can support you through the due diligence process.