Vendor Due Diligence
Due diligence commissioned by the seller to prepare for sale and provide buyers with independent verification.
Full Definition
Vendor Due Diligence (VDD) is a due diligence exercise commissioned and paid for by the seller, with reports made available to prospective buyers. It has become increasingly common in UK M&A processes.
Types of VDD:
- Financial VDD (most common)
- Tax VDD
- Legal VDD
- Commercial VDD
- IT/Technology VDD
Benefits for sellers:
- Control the narrative
- Identify issues early (fix or prepare explanations)
- Accelerate buyer due diligence
- Create competitive auction dynamic
- Professional presentation of the business
- Reduce management time with multiple buyers
Benefits for buyers:
- Independent verification of key information
- Standardised information for all bidders
- Accelerated due diligence timeline
- Reliance letter may be available
Limitations:
- Seller-commissioned (potential bias perception)
- May not cover buyer-specific concerns
- Reliance letters have limitations
- Cost borne by seller (often recovered in price)
UK practice: VDD is now standard in organised auction processes, particularly for private equity exits and corporate disposals. Quality of earnings VDD reports are especially common.
Related Terms
Due Diligence
The comprehensive investigation and analysis of a target business before completing an acquisition.
Quality of Earnings (QoE)
A financial due diligence analysis assessing the sustainability and accuracy of a company's reported earnings.
Confidential Information Memorandum (CIM)
A detailed document providing comprehensive information about a business for sale to potential buyers.
Data Room
A secure repository where confidential documents are stored and shared with potential buyers during due diligence.