A guide to the due diligence process on Acquire.com
Contents
What is due diligence?
Due diligence is the process where a buyer checks over your business to avoid any hidden problems or unknown risks that could impact their return on investment.
Most due diligence happens after signing a letter of intent (offer). Once due diligence is complete, you'll both sign an asset purchase agreement (APA) binding you to the sale.
How does due diligence work?
Due diligence is essentially a question-and-answer session.
Buyers will inquire about your finances, people, technology, legal, and more. You must provide evidence for your answers, so build your data room early.
If the buyer is happy with your answers and evidence, you'll both sign the APA formalizing your acquisition and move into escrow.
However, if the buyer finds something they don't like, they can:
- withdraw from the acquisition,
- negotiate a lower purchase price, or
- add post-closing conditions (like holdbacks and earnouts).
How to pass due diligence
To help you pass due diligence, we use artificial intelligence to analyze the details of your acquisition and generate due diligence tasks for you and the buyer to complete.
Tasks are grouped into categories that reflect different areas of your business (financial, legal, compliance, risk, and more). You can also edit or add tasks and categories.
Every task has a name, status, owner, and due date, all of which can be edited to suit your acquisition. (If you're unsure how to do your due diligence tasks, contact our support team.)
If the buyer doesn't complete their assigned tasks, or prevents you from completing yours, call them to resolve the issue. Regular, honest communication regularly saves acquisitions.
Due diligence is your and the buyer's responsibility. Only proceed in selling your business if you're sure of the risks. For more details, view our terms and conditions.
What happens when you complete all due diligence tasks?
When you and the buyer have completed all due diligence tasks, you can then sign an asset purchase agreement (APA), which legally binds you to close at the stated price and terms.
The buyer can create or upload an APA using our APA builder. Choose the correct signatory (individual or company) to ensure the correct legal information is included in your APA.
Since the APA is a legally-binding document, please consult with your attorney if you have any questions on the wording or its implications.
Where to get due diligence help
Your M&A advisor can answer common due diligence questions or refer you to specialists for more technical help. Contact our M&A team for free guidance at support@acquire.com.
Still need help?
Search the help center again or contact us at support@acquire.com.