Every document a buyer will ask for.
Grouped the way a diligence request actually arrives, with the reason behind each item, because the reason is what tells you whether a substitute will do.
How a request list actually arrives
Not as one list. It arrives after the LOI as a numbered document from the buyer or their adviser, then again from their accountant with the financial section expanded, then in fragments as answers raise new questions. Anyone who prepares for a single list is surprised twice.
The list below is grouped the way requests are grouped, with the reason each item is asked for, because the reason is what tells you whether a substitute will do.
Corporate and legal
Establishes that you own what you are selling.
- Certificate of incorporation and any amendments
- Shareholder register and any shareholder agreements
- Board and shareholder minutes
- Share option or phantom scheme documents
- Any litigation, past or threatened
Financial and tax
The buyer will rebuild your earnings from these, not accept them.
- Three years of statutory accounts
- Three years of tax returns and any correspondence with the tax authority
- Monthly management accounts for the current year
- Aged debtors and creditors
- Bank statements for the last twelve to twenty-four months
- The add-back schedule, with evidence for each line
Commercial
Where concentration risk is found, and where price moves.
- Top customers by revenue, for three years
- Customer contracts, including notice and change-of-control terms
- Supplier contracts and any exclusivity
- Pipeline or order book
People
Usually the largest cost line, and the least documented.
- Employee list with role, start date, salary and notice
- Employment contracts, especially for anyone senior
- Payroll reports for twelve months
- Any consultants and how they are engaged
Operations, property, insurance
The things that are only noticed when they are missing.
- Lease or title, with every amendment
- Asset register
- Insurance policies and claims history
- Licences, permits and certifications
- IT systems, who owns them, and what happens on a change of control
Questions
- What documents does a buyer ask for when buying a business?
- Three years of financial statements and tax returns, management accounts, the customer contracts, payroll, the lease, insurance, and the corporate records. The list below groups them the way a request list actually arrives.
- How long does it take to gather them?
- Longer than owners expect, and the delay is rarely the documents that exist. It is the ones that were never written down: the customer agreement that was a handshake, the lease amendment nobody kept.
- What if a document does not exist?
- Say so early. A missing document found in week one is a fact; the same document found in week six, after a buyer has spent money, reads as something withheld.