First-Time Buyers
What is due diligence?
The formal verification process between signing an LOI and closing the deal.
Practical Explanation
Due diligence is a 30–90 day investigation across financial, legal, operational, and commercial dimensions. The buyer verifies the seller's claims, identifies risks, and refines the deal terms (sometimes the price). Confidential and sequenced — usually triggered by a signed LOI.
Real-World Example
A buyer's 45-day DD includes a QoE, customer reference calls, lease review, IT review, and team interviews, ending with a renegotiated working-capital peg.
Typical cash required
Plan for $10K–$50K in third-party DD costs on a sub-$5M deal.
Experience required
Coordinate with CPA, attorney, and industry expert.
Advantages
- ✓Reduces post-close surprises
- ✓Creates negotiating leverage
- ✓Builds confidence to close
Risks
- !Process fatigue
- !Diligence reveals dealbreakers
- !Seller withdraws under pressure
Frequently Asked Questions
Who pays for diligence?
Each side pays for its own advisors; the buyer carries most of the DD cost.
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