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When looking to sell a business, most sellers recognise the need to prepare financial statements, management accounts, contracts and corporate records. Those that are most successful, though, realise that preparation needs to go beyond assembling the obvious documents.

The less obvious gaps — inconsistent figures, undocumented risks, outdated policies and missing supporting evidence — can create delays, additional scrutiny and uncertainty. This is self-sabotaging behaviour when — as EY note — “data exit readiness is essential to support valuation and reduce deal friction”.  

Identifying gaps in this due diligence data before a prospective buyer does is the key to preparing effectively for the M&A process. 

How can you ensure these gaps are not overlooked, and give your sale the best chance of progressing swiftly and smoothly?

The Sell-side Due Diligence Checklist: Five Commonly Overlooked Areas

The standard due diligence sourcebook is well known. To increase your chances of success, your focus should be on the things teams often overlook. Here are five areas that are frequently underestimated.

1. Financial consistency and the evidence behind the numbers

When doing their due diligence, buy-side teams are looking for consistency, evidence and completeness. Give buyers confidence in your business by ensuring you include: 

• Reconciliation between audited accounts, management accounts, forecasts and the financial information used in the sales memorandum.
• Clear evidence supporting EBITDA adjustments, exceptional items, working capital assumptions and net debt.
• Up-to-date forecasts with defensible assumptions and explanations for material variances.

Inconsistencies can invite further questions, undermine confidence in the seller’s financial narrative and sow seeds of doubt in prospective buyers’ minds.

2. Legal, tax and corporate housekeeping

When it comes to corporate due diligence, attention to detail matters. A sloppy approach to your sales documentation suggests a lax attitude to doing business — whether or not this is really the case. Be alive to:

• Missing signatures, expired agreements, change-of-control clauses and incomplete contract registers.
• Ensuring that shareholder agreements, board minutes, statutory filings, tax records and outstanding legal matters are up to date and comprehensive.
• Intellectual property ownership is in order: licences, employment documentation and regulatory obligations.

Minor administrative gaps can become material diligence questions when they affect ownership, liabilities or the transferability of the business. They also suggest a slapdash approach that no potential acquirer will want to buy into.

3. Commercial and operational evidence

Detailing and evidencing your claims here is vital in gaining the confidence of your prospective buyer. Focus on providing:

• Verifiable data on customer and supplier concentration, retention, contract dependencies and renewal risks.
• Evidence for growth claims, pipeline forecasts, margins and operational KPIs.
• Clear explanations of material customer losses, unusual trading patterns or dependencies on key personnel.

Sellers need to substantiate the commercial story with evidence, not just offer headline metrics and optimistic projections.

4. Data protection, cybersecurity and sensitive information

Taking a meticulous approach to compliance here supports your claims of business rigour. Sell-side teams need to ensure they provide:

• Evidence of GDPR compliance, relevant data-processing arrangements and security policies.
• Information on any cyber incidents, material vulnerabilities, access controls and outstanding remediation.
• Details of the way they deal with personal data, commercially sensitive contracts and other information requiring restricted disclosure or redaction.

Of course, the information within these disclosures might itself be subject to data protection and other cybersecurity considerations. Preparing documents is only half the task; sellers must also decide what can be disclosed, to whom and under what controls.

5. Data room structure, ownership and buyer Q&A

Increasingly, those engaged in the M&A process are turning to online data rooms to host their due diligence documentation and investor roadshows. 

Data room technology can underpin investor and stakeholder communications and provide a platform to securely share corporate information in the M&A process. For sell-side teams, they can be invaluable in ensuring appropriate access to information, delivering user data to streamline your sales process and enabling secure real-time access to all relevant documentation.

But there are several watchouts and data room best practices that will help to ensure data rooms protect your company-confidential information, while signposting your potential buyers clearly to the information they need:  

• Logical folder structures, consistent naming conventions, accurate indexing and version control.
• Clear ownership of each diligence workstream, response deadlines and approval processes for answers.
• A process for handling buyer questions consistently, recording responses and identifying outstanding requests.

Even when you provide complete documentation, due diligence can become a bottleneck if buyers cannot find the information they need or management cannot respond promptly. Our data room checklist can help you to identify best practices for data room selection and use.

From Checklist To Deal Readiness: How To Put Preparation Into Practice

This checklist covers the five key areas that typically get overlooked when sell-side teams provide due diligence information. How can we turn the checklist items into actionable next steps? We suggest you:

• Start early with a structured review of documents, evidence and unresolved issues.
• Assign owners to each workstream and maintain a central record of missing information, deadlines and approvals.
• Review access permissions and confidentiality requirements before sharing documents with prospective buyers.
• Establish a secure, well-organised data room with document tracking and a clear process for managing buyer questions.

In a rigorous, polished due diligence process, technology should support the process, not replace financial, legal or commercial preparation. A well-chosen data room can fulfil this role, acting as a practical tool to securely organise and share transaction documentation, controlling access, tracking engagement and managing Q&A in one place.

Make Readiness Part Of Your Sale Strategy

It’s clear that when it comes to M&A, due diligence preparation starts well before the data room opens. Accurate evidence, early issue identification and disciplined information management help reduce avoidable friction and build buyer confidence. As a sell-side team you should enter the process prepared to answer questions, substantiate the business case and keep the transaction moving.

Our article on How to choose and use a data room for due diligence has more detailed tips on data room selection and use. You can explore how Perivan’s Engage Data Room can support a more organised, secure and efficient M&A process here, or get in touch to find out more.