Due Diligence Checklist for UK Business Brokers

Why Due Diligence Makes or Breaks Deals#

Due diligence is the process through which a prospective buyer evaluates a target company before completing an acquisition. In the UK market, thorough DD is not just best practice — it's essential for protecting all parties in the transaction.

As a broker, your role during DD is to facilitate the process, keep it on track, and manage the inevitable friction between buyer and seller expectations.

The UK Due Diligence Framework#

UK transactions typically involve three parallel DD workstreams:

Financial Due Diligence#

• Historical financial statements — typically 3 years of audited or management accounts
• Management accounts — current year-to-date monthly figures
• Revenue analysis — customer concentration, recurring vs one-off revenue
• Working capital — normalised working capital analysis
• Tax compliance — corporation tax, VAT, PAYE history
• Debt and liabilities — loans, overdrafts, hire purchase, contingent liabilities
• Cash flow — historical and projected cash flows
• Adjustments — owner salary normalisation, one-off costs, related party transactions

Legal Due Diligence#

• Corporate structure — company formation documents, shareholding, cap table
• Contracts — key customer and supplier agreements, change-of-control clauses
• Employment — contracts, handbooks, TUPE considerations, pension schemes
• Property — leases, licences, property ownership documentation
• Intellectual property — trademarks, patents, domain names, software licences
• Litigation — current or threatened legal proceedings
• Regulatory — industry-specific licences, permits, and compliance records

Commercial Due Diligence#

• Market analysis — market size, growth trends, competitive landscape
• Customer relationships — key account dependencies, Net Promoter Score
• Operational processes — standard operating procedures, key person dependencies
• Technology — systems, software stack, technical debt
• Growth opportunities — expansion plans, new market potential

Managing the DD Timeline#

A typical UK transaction DD process takes 4-8 weeks from signing Heads of Terms to completion. Here's how to keep it on track:

1. Set expectations early — agree a DD timetable in the Heads of Terms
2. Prepare a data room — organise documents before DD begins
3. Assign responsibilities — clear ownership for each workstream
4. Weekly progress calls — keep all parties aligned and address blockers
5. Issue tracking — maintain a live log of DD findings and resolutions

Red Flags to Watch For#

During DD, certain findings should raise immediate concern:

• Customer concentration — any single customer representing >25% of revenue
• Key person dependency — the business can't function without the owner
• Undisclosed liabilities — debts or obligations not mentioned during negotiations
• Regulatory non-compliance — missing licences or pending enforcement action
• Inconsistent financials — significant discrepancies between reported and actual figures

Your DD Preparation Checklist#

Getting ahead of the DD process dramatically improves your chances of a smooth transaction. We recommend starting document preparation as soon as you sign a mandate — not when an offer is received.

DealStudio's virtual data room makes it easy to organise, share, and track documents throughout the DD process. Book a demo to see how it works.