Due Diligence

Looking for a solicitor to help with due diligence?

Due diligence is the investigation you carry out before buying a business. It’s how you find out whether the business you’re buying is really what the seller says it is. Done properly, it protects you from nasty surprises after completion. Done badly – or not at all – and you could end up paying over the odds for a business with hidden problems.

I’m Steven Mather, and legal due diligence is a key part of the M&A work I do for clients buying businesses. I also act for sellers, helping them prepare for and respond to the buyer’s due diligence process. Whichever side of the deal you’re on, I’ll make sure the due diligence process runs efficiently and achieves its purpose.

What is legal due diligence?

Legal due diligence is one of three types of investigation that typically happen when a business is being sold. Commercial due diligence is usually handled by the buyer themselves – it’s the process of satisfying yourself that the business opportunity is a good one. Financial due diligence is handled by the buyer’s accountants, who examine the target company’s financial records to verify that the numbers stack up and the asking price is justified.

Legal due diligence is what I handle. It involves a systematic review of the target business’s legal affairs to identify any risks, liabilities or issues that could affect the value of the business or cause problems after completion. The findings feed directly into the negotiation of the purchase agreement – if due diligence reveals an issue, it either gets reflected in the warranties, dealt with by a specific indemnity, or leads to a price adjustment.

What does legal due diligence cover?

The scope of legal due diligence varies depending on the size and nature of the business, but a thorough review will typically cover the company’s corporate structure and records, its share capital and any shareholder agreements, material contracts with customers, suppliers and other third parties, employment arrangements including contracts, handbooks and any ongoing disputes, intellectual property such as trademarks, patents and domain names, property including freehold ownership or leasehold arrangements, regulatory compliance and any licences the business relies on, insurance cover, any current or threatened litigation, and the tax position.

I’ll prepare a detailed due diligence questionnaire tailored to the specific business, review the seller’s responses and supporting documents, and produce a report highlighting any issues that need to be addressed before or at completion.

Due diligence for sellers

If you’re selling your business, you’re on the receiving end of due diligence – but that doesn’t mean you should be passive. Smart sellers prepare for due diligence before the process starts. That means getting your legal house in order, assembling a data room with key documents, and anticipating the questions a buyer’s solicitor is likely to ask.

I help sellers prepare for due diligence so that when the questionnaire arrives, you can respond quickly and comprehensively. A well-prepared seller gives the buyer confidence, reduces the risk of price renegotiation, and keeps the deal on track. I’ll also review your responses before they go out to make sure you’re not inadvertently disclosing something in a way that creates problems.

How due diligence feeds into the purchase agreement

Due diligence doesn’t exist in isolation – it directly shapes the terms of the purchase agreement. If the due diligence process reveals that a key customer contract is about to expire, the buyer might want a warranty that the contract will be renewed, or a price reduction to reflect the risk. If there’s a pending HMRC enquiry, the buyer will want a tax indemnity. If an employee has raised a grievance, the buyer will want to understand the potential liability.

The skill is in knowing which issues are deal-breakers, which can be managed through the agreement, and which are just normal business noise. That commercial judgement is something I bring from having done this hundreds of times.

How much does due diligence cost?

I work on fixed fees. For a buyer, the cost of legal due diligence typically ranges from £3,000 to £10,000 plus VAT depending on the size and complexity of the target business. For a seller, preparation and support through the due diligence process is usually included within the overall transaction fee, although we can do it as a standalone service. I’ll always confirm the fee before work starts.

Next steps

Whether you’re buying and need due diligence done properly, or selling and want to be prepared, call me on 0116 3667 900 or email steven@stevenmather.co.uk. Let’s talk about your deal.