Financial due diligence for buying a business: check the seller’s numbers before you commit
For buyers of UK companies with turnover up to £15m. I read up to five years of the target’s accounts, check the figures against the records the seller provides, and tell you whether the profit is real, what the net debt is, what working capital the business needs and what to ask before you sign.
Limited scope. Due diligence on the records the seller provides, prepared for you as the buyer. It is not an audit, not legal or tax due diligence, and not advice on whether to buy or what to pay. The indicative value range is not a formal valuation.
When you need one
- Before you make an offer or sign heads of terms, to know what the business really earns.
- After heads of terms, as the financial checks in your due diligence, alongside your solicitor’s legal work.
- When the lender funding the purchase wants the target’s figures reviewed.
- When the asking price rests on add-backs and an adjusted profit you cannot check yourself.
What's in the report
- Up to five years of the target’s accounts analysed: trends, margins, cash, borrowing and returns
- Quality of earnings: the seller’s adjusted profit tested add-back by add-back, and the underlying EBITDA I would put to a lender
- Cash conversion: does the profit turn into cash?
- Net debt and debt-like items: loans, leases, HMRC arrears, deferred income, director’s loans and anything else that should come off the price
- Working capital: its normal level, and how far the balance sheet at completion is likely to sit from it
- The records checked: management accounts against the filed accounts, the bank against the ledgers, customers and suppliers, VAT, PAYE and payroll
- Trading since the last year end
- An indicative value range, not a formal valuation
- Red flags and the questions to put to the seller, in order of importance
- Proprietary business intelligence analysis, built by a Chartered Accountant, included
What it costs
The fee depends on the size of the business you are buying:
| Target's annual turnover | Fixed fee |
|---|---|
| Under £1m | £2,699 |
| £1m to £5m, or 10 to 24 staff | £4,299 |
| £5m to £15m, or 25 to 49 staff | £4,999 |
Find the band from the target’s latest annual turnover, or its average number of employees if that puts it in a higher band. Over £15m turnover or 50 or more staff: a fixed quote on request. Groups: each extra trading company at half its band price, plus £649 for the group view.
Every quote is fixed in writing before I start. You pay nothing up front. When the report is ready I invoice, payable within 7 days, and send the final PDF once it's paid.
Proprietary business intelligence analysis, built by a Chartered Accountant.
Peer benchmarking against comparable UK businesses by sector, size and region, sector and regional risk context, industry search-trend analysis (demand trends for your sector) and, where it is relevant, the local market and competitor picture, all interpreted in plain English by a Chartered Accountant, with a short methodology note in the report. Included in the fee above. What is included
How it works
A free 10-minute call if you want one. You send what the seller has provided, or give me access to the data room, and tell me your deadline. I send a fixed quote within 24 hours, then the first draft within 5 working days of complete records. After delivery you can send one follow-up email with your questions.
Who can see it
The report is prepared for you, the buyer. The seller does not see it unless you choose to share it. Your lender can see it once they have signed my standard release letter.
What it does not cover
Legal due diligence (your solicitor), tax due diligence and structuring (a tax adviser), and the decision to buy or the price. Need a forecast for the acquisition loan as well? See the business cash flow forecast →
About financial due diligence for buyers
What records do you need?
The seller's filed accounts, monthly management accounts with a balance sheet, bank statements, aged debtors and creditors, sales by customer, VAT returns, payroll summaries, the accountant's year-end adjustments and tax computations, and the main contracts and leases. They usually come through a data room or from the seller's accountant.
Is this full due diligence?
No. It is the financial part, on a limited scope agreed in the engagement letter. Legal due diligence is for your solicitor, and tax due diligence and structuring for a tax adviser. The report says what I checked and what I did not.
Will you tell me whether to buy, or what to pay?
No. I report what the numbers show, the risks and the questions to ask. The decision and the price are yours, with your advisers. I do not give investment or corporate finance advice.
Is this a valuation?
No formal valuation. The report gives an indicative value range from published multiples of earnings for similar small company sales, adjusted for net debt and working capital. It is labelled as indicative and is not an opinion of value.
What if the seller will not share the records?
Then I work from the filed accounts and what you have, and the report says clearly what could not be checked. A seller who will not share records is a finding in itself.
Can my lender see it or rely on it?
The report is prepared for you, the buyer. Your lender can see it once they have signed my standard release letter. Anyone who wants to rely on it must first agree separate terms with me in writing, including a limit on my liability.
How long does it take?
The first draft arrives within 5 working days of complete records. Tell me your exclusivity deadline at the start so the timetable fits it.
Is my information confidential? Can you sign an NDA?
Yes. I am bound by the ICAEW Code of Ethics, which requires integrity, objectivity and confidentiality. I will sign the seller's NDA or yours before any documents are shared, at no charge.
Selling rather than buying? See the sale readiness review. Checking your own accounts first? See the financial, business and due diligence review.