What’s Fair When requesting Business Information Before Due Diligence

When buyers express interest in a business, it’s reasonable to expect meaningful insights upfront. However, business sales follow a structured process that protects both buyers and vendors. While buyers receive substantial information early on, further detailed requests are reserved for the due diligence phase. Here’s what you can expect to receive initially, how the process works, and why this approach ensures fairness for all involved.

1. What Information is Provided in a Business Profile or Information Memorandum (IM)?

We provide buyers with a comprehensive business profile or IM, which offers valuable operational, financial, and commercial insights. This information is designed to help you make an informed decision about whether to submit an offer.

Here’s what’s typically included:

Business Overview: History, operations, and key selling points.
Location & Premises: Address, lease terms, seating capacity, and licensing details.
Staff Overview: Roles, wage breakdowns, and staff structure.
Financials: Supplied and normalised accounts, plus key performance indicators (e.g., wage % and rent %).
Contracts & Obligations: Details on equipment leases, supply agreements, and ongoing commitments.
Growth Opportunities: Areas where the new owner could expand or improve the business.
Reason for Sale and Transition Plan: Insights into why the owner is selling and what support they’ll provide during handover.

This business profile provides you with meaningful insight into the business’s key aspects, equipping you to evaluate whether to proceed with an offer.

2. How the Due Diligence Process Works

Once an offer is accepted, buyers enter the due diligence phase, which typically lasts around 10-20 working days (though this period can be negotiated and will be in your agreement). Think of it like getting a building report when buying a house—it’s a key condition that allows you to confirm all the business’s details before completing the purchase.

During this time, you can request additional information, such as supplier agreements, staff contracts, or in-depth financials, to verify the claims made in the IM. If the findings reveal discrepancies, you have the right to renegotiate the deal’s terms or even withdraw your offer without penalty. This staged approach ensures that both parties operate transparently and fairly.

3. Managing Confidentiality and Vendor Effort

Handling multiple detailed information requests from every buyer can exhaust vendors, especially while they continue running the business. There are also confidentiality risks—vendors need to protect sensitive data, such as customer information or supplier agreements, particularly when the sale must remain discreet.

By limiting ad-hoc requests to the due diligence phase, vendors ensure their time and resources are focused on serious buyers. Buyers, in turn, receive the information they need without compromising the vendor’s business operations or confidentiality.

4. Avoiding the Pitfalls of Premature Due Diligence

We’ve seen many first-time buyers invest significant time and money with accountants or advisors before making an offer, only to have that offer rejected. While it’s understandable to want certainty early on, it’s often better to first agree on key terms and price with the vendor.

This approach ensures you don’t waste resources on opportunities that may not move forward. It also prevents vendors from becoming overwhelmed by responding to speculative requests from buyers who are not yet fully committed.

5. A Fair and Balanced Process for Both Parties

This structured process offers fairness to both vendors and buyers:

For vendors, it ensures their time isn’t wasted responding to multiple detailed requests from uncommitted buyers, protecting the business's operation and confidentiality.
For buyers, it allows thorough due diligence at the appropriate time, without incurring unnecessary costs early on.

By coming to an agreement on the essential terms first, both parties are aligned and can move smoothly through the process with confidence.

6. Building Trust Through Process

While buyers may want detailed reports early, following this structure ensures fairness and builds trust. Vendors can protect their business while sharing sensitive information at the right time, and buyers know they’ll have the opportunity to verify every detail during the due diligence phase.

Conclusion

Providing key business information upfront, while reserving further detailed requests for the due diligence phase, ensures a fair, efficient, and transparent process. Just like a building report condition protects home buyers, due diligence conditions give business buyers the opportunity to confirm all the business’s details before finalising the purchase. If discrepancies arise, buyers can renegotiate the terms or walk away without penalty.

This balanced approach prevents unnecessary delays, protects both parties, and ensures everyone’s time and resources are used wisely.

If you have any questions about the due diligence process or need further guidance, feel free to reach out. We’re here to support you every step of the way and ensure a positive outcome for all involved.

Gina