Buy-side due diligence

Approach and deliverables

We define the target, period and materiality scope before examining financial, tax and compliance records. The work distinguishes confirmed exceptions, unanswered questions and matters requiring specialist investigation.

Outputs can include a red-flag report, follow-up requests and a link from findings to potential deal actions. The buyer can use the findings to discuss conditions, indemnities or further investigation with counsel.

1. Agree the target perimeter, covered periods and buyer questions.
2. Issue and track evidence requests against those questions.
3. Reconcile findings to source records and seek factual clarification.
4. Hand over findings, unresolved requests and possible transaction actions.

A finding should explain its evidence and limitations. A missing response is not treated as confirmation that no issue exists.

Information to prepare

• Target accounts and management information
• Tax returns and dispute records
• Corporate, contract and licence documents
• Transaction perimeter and buyer priorities

Identify excluded entities, assets and activities so the record request matches the proposed purchase. Keep source versions and the date of management explanations. Record any sampling or access limits in the work file and report rather than implying exhaustive coverage.

A practical example

A recurring tax reconciliation difference may affect working capital and warranties. Trace the cause and quantify the evidence available before treating it as either harmless or a final liability.

For that tax difference, distinguish the amount shown in the ledger, the return position and management’s explanation. State what can be reconciled and what remains unresolved. Any deal action then rests on an identifiable finding rather than an unsupported estimate.

Scope and responsibilities

Diligence is limited by scope and records supplied. It is not a statutory audit or a guarantee that every liability has been found; specialist technical and forensic work requires separate agreement.

The engagement letter records the workstreams included, client decisions and external professional costs. New transaction steps or material changes are assessed before the scope is extended.

The completion pack can include an evidence-linked findings report, open-request list and issues for counsel or other specialists. The buyer makes the commercial decision; drafting protections, valuation and completion work are separate unless expressly included.