Seller due diligence: organize the evidence

Build an index before filling folders.

Use numbered folders and a request log. For each request record the question, responsible person, source document, disclosure approval, response date and unresolved issue. Mark missing, not applicable and pending review separately so silence does not look like completion.

Provide a short explanation when a document does not answer the question on its own. A signed contract, for example, may need amendment history and a current status note. Keep historical documents and management explanations distinguishable.

• Corporate and ownership records
• Financial statements, monthly results and accounting reconciliations
• Customers, suppliers, contracts and order status
• People, key roles and operating procedures
• Premises, equipment, IP, licences and material commitments
• Disputes, compliance questions and specialist reports

Connect reported earnings to operating evidence.

Ask the finance team to reconcile revenue and margin explanations with the underlying records. Separate signed orders, conditional awards and sales pipeline. For project businesses, identify work in progress, change orders, billing milestones and costs still required to finish the work.

Prepare a customer concentration schedule using anonymized codes where appropriate, with revenue period, margin basis, contract status and relationship owner. Repeat purchasing is different from a contractual commitment. Explain the difference rather than describing all returning customers as recurring revenue.

• Support proposed earnings adjustments

Test continuity of people, assets and obligations.

For material equipment, identify ownership or lease, condition, maintenance history and known replacement needs. For technical businesses, assemble IP assignments, licence terms, development documentation and support obligations for specialist review.

Create a contract review list with the legal entity, expiry, renewal mechanism, assignment or change-of-control questions and the person responsible for obtaining advice. Licences, customer approvals and employee qualifications require individual assessment; their presence today does not prove they transfer.

Keep disclosure controlled and answers consistent.

Use the confidentiality plan to decide when identifiable and sensitive records may be released. Keep a version history and a single question log. Have the appropriate adviser review responses involving accounting, tax, law or technical compliance rather than giving a rushed assurance.

Meet regularly to reconcile open issues with the offer and draft agreement. If a finding changes the economics or closing requirements, record the proposed treatment explicitly. Closing should not depend on an informal answer that conflicts with the written documents.

• Plan disclosure controls
• Keep the offer comparison current

Use the process to prepare the handover.

Turn unresolved operational questions into a closing and transition list: access to systems, authorized signatories, supplier introductions, payroll responsibility and customer communication. Assign a date and accountable person to each item.

BDC's sale guidance emphasizes preparation with advisers. The folder structure here is our practical suggestion and must be adapted to the business and buyer's legitimate verification needs.