Due diligence checklist for buying a business: what to ask for and in what order

A due diligence checklist is the list of things you insist on seeing before money changes hands, ordered so that the cheapest deal-breakers surface first. Most published lists are alphabetical inventories of every document a company could own, which is why buyers drown in folders and still miss the two facts that mattered. The useful version is short at the top, sequenced by what could end the deal, and tied to a named person who signs off each answer.

What a due diligence checklist is actually for

Three jobs, and only three. It confirms that what you are buying exists and is owned by the seller; it finds liabilities that survive the sale; and it tests whether the numbers behind the price hold up. Anything on the list that serves none of those is a courtesy request you can drop when time is short.

Sequence the requests, do not alphabetise them

Ask in the order that a "no" would be most expensive to discover late.

1. Ownership and structure: incorporation documents, the share register, any option or convertible instrument, and confirmation that the people signing can actually sell.
2. Title to the things you are paying for — premises leases, intellectual property assignments from every contractor who touched the product, equipment charges and finance agreements.
3. Contracts with change-of-control clauses. A customer base that can walk on completion is a price question, not a paperwork question.
4. Employment: headcount, contracts, notice periods, outstanding claims, and the pension position. Nothing here is renegotiable after completion.
5. Financial substance: management accounts against filed accounts, debtor ageing, revenue concentration, and whether reported profit survives normalisation.
6. Tax and compliance history — filings, open enquiries, licences and registrations that the business needs to keep trading.
7. Litigation, disputes, and anything that has been settled quietly in the last three years.

Run the checklist as a register, not a folder

Each line needs a state, not a tick. Requested, received, reviewed, escalated, closed — plus who owns it and the date it changed. A due diligence checklist kept as a register tells you at a glance which of eighty requests are still open two days before exchange; the same checklist kept as a shared folder tells you only which files happen to exist. Ettex Records is built for exactly this shape: one row per request, a status column, an owner, and the evidence attached to the row that raised it.

Log the date you received each item as well as the date you asked. Half of the arguments in a delayed deal are about who was waiting for whom.

The lines buyers most often leave off

• Contractor IP assignments — the single most common defect in software acquisitions.
• Personal guarantees given by the sellers, which do not automatically disappear on completion.
• Data protection: what personal data comes with the business and whether you have a lawful basis to keep using it.
• Software licence compliance, including seats in use versus seats paid for.
• Key-person dependency, written down honestly rather than described as culture.
• Deferred or disputed supplier balances that never reached the ledger.

Two neighbouring processes use the same machinery and are worth separating in your own head: client due diligence is the anti-money-laundering check you run on a counterparty, and third party risk management is the ongoing version you run on suppliers after onboarding. A deal checklist borrows their discipline about evidence, but it ends at completion.

A list of requests has to be answered somewhere controlled. Virtual data rooms for due diligence add per-party permissions, staged release and a page-level access log, which starts to matter the moment two bidders are reading at once.

Closing the list

Before you sign, print the register and look only at the open rows. Every one of them is either a price adjustment, a warranty, an indemnity, or a condition of completion. If an open row is none of those four, it was never a due diligence question — it was curiosity, and curiosity should not hold up an exchange.