Estimated reading time: 17 minutes
Last updated: July 2026
Agreeing to sell your agency feels like the finish line, but due diligence – the buyer’s process for verifying everything before they’ll actually complete – is what stands between that agreement and the money landing in your account.
Paul Bevington, Partner and General Counsel at EMW Law, has spent over two decades helping business owners through exactly this moment. On a recent episode of The Fractional CFO Show, he described it as reaching the top of a mountain only to look up and see another peak. What follows the handshake, usually formalised in a Heads of Terms, is due diligence: the process where the buyer checks everything before they will actually complete. Most founders underestimate how long it takes, how much of their time it absorbs, and how stressful it can be to get through.
What due diligence actually means
The meaning of due diligence, in plain terms, is the buyer’s verification process. Having agreed a price and signed a Heads of Terms, the buyer wants confirmation that what they are paying for matches what they think they are buying, and that nothing unexpected is lurking in the business that would change their appetite for the deal. It exists because a headline agreement on price and terms is only ever based on the information available at that point, and the buyer has not yet had the chance to check it.
The exact shape of the due diligence process varies depending on the deal structure and who is buying. A share purchase, where the buyer takes on the company as it stands, including its history and liabilities, tends to trigger a wider due diligence exercise than an asset purchase, where the buyer selects only specific assets and contracts, and inherits far less unseen risk. A management buyout, where the buyer already works in the business, can move faster because much of the verification the buyer would otherwise need has already happened through day-to-day involvement. For an external buyer, private equity investor, or trade acquirer, the process is more thorough because they are starting from a position of reduced inside knowledge.
Buyers also run commercial due diligence alongside the financial and legal work, testing the business against market reality rather than just its paperwork. This often happens through direct conversations with key clients and an assessment of competitive position. For the practical detail on what this and the rest of a due diligence process actually involves preparing, see our full due diligence checklist for agency founders.
What stays constant across almost every deal is the combination of due diligence, warranties, and disclosure, which together take up most of the time and stress in a sale.
Before any of this begins, a seller will typically expect a signed non-disclosure agreement (NDA) from the buyer. Due diligence involves handing over client lists, pricing, and margin data that a founder would never otherwise share outside the business. An NDA is the standard protection covering everyone involved on the buyer’s side, including their advisers.
Why it can feel like Groundhog Day
Sellers rarely appreciate quite how wide-ranging due diligence is until they are in it. Buyers take what amounts to a no-stone-unturned approach, covering legal, financial, and tax questions that often overlap. A seller answers the first set of questions, believes they are finished, and then receives a second set built directly on their answers to the first. This can repeat several times, and it is one of the more disorienting parts of the process for founders who have never sold a business before.
The practical way to prepare is to work through what a due diligence checklist actually asks before the real one lands. Founders can request a sample legal due diligence questionnaire from a solicitor or you can download our due diligence checklist, then honestly assess how quickly they could pull together answers to each item. The same exercise applies to financial, accounting, and tax due diligence. If gathering the required information would currently take weeks rather than days, that is the gap worth closing before a sale process starts, not during it.
The financial due diligence lens
This is the area where a fractional CFO’s involvement changes the outcome most directly. Buyers scrutinise financial due diligence (FDD) to confirm that reported profitability reflects reality, and that the numbers used to agree the price will hold up once examined properly.
Management accounts under scrutiny
Management accounts sit at the centre of this. A buyer will want to see monthly reporting that shows revenue, margin, and cash performance over an extended period, not a single set of annual figures produced retrospectively. Where management accounts have been inconsistent, produced late, or not broken down by client or service line, it becomes harder to demonstrate that the business has been run with genuine financial control, and buyers notice that gap quickly.
EBITDA and Quality of Earnings
EBITDA is scrutinised just as closely, and almost always adjusted. Buyers will normalise the reported EBITDA figure by removing one-off costs, above-market owner remuneration, and non-recurring items, to arrive at a sustainable earnings figure that reflects what the business can be expected to generate going forward. This exercise has a name: a Quality of Earnings review, and it is standard practice on almost any deal involving a private equity buyer or larger trade acquirer. Founders who have not already thought through which of their costs are genuinely one-off, and which are simply part of running the business, often find this adjustment process frustrating, largely because they are seeing their own numbers reinterpreted for the first time under someone else’s scrutiny.
Forecast credibility
Buyers test forecast credibility as well. A buyer assessing future performance will test whether the pipeline and growth assumptions behind a forecast are realistic, particularly where recent growth has depended on client concentration or one-off wins that may not repeat. The stronger the underlying financial reporting has been, the less room there is for a buyer to argue the numbers cannot be trusted.
ACC’s CFO Perspective
At ACC, we can run a pre-sale financial readiness review with clients well before a live sale process starts, often a year or more ahead of any buyer conversation. We work through the same cost categorisation a buyer’s advisers will apply later: which costs are genuinely one-off, which owner-related costs would look different under new ownership, which client relationships carry more risk than the P&L suggests. Doing this early doesn’t just make the eventual due diligence process faster. It means founders walk into buyer conversations already knowing what their numbers will say, rather than finding out in real time under someone else’s scrutiny.
What buyers typically request
In practice, a buyer’s financial due diligence team will typically request three to five years of management accounts and statutory accounts, a detailed breakdown of revenue and margin by client, aged debtor and creditor listings, payroll records, existing contracts of employment, and any outstanding loan or lease agreements. Agencies that already produce this information routinely as part of normal monthly reporting can usually turn requests around within days. Agencies reconstructing it for the first time under deal pressure typically take weeks, and every week spent gathering historic data is a week the buyer spends wondering why it was not readily available.
Building a data room before you need one
A data room is the secure repository where all of this documentation is held for the buyer’s team to review, and how well organised it is says almost as much to a buyer as the documents themselves. A well-built data room is structured by category, financial, legal, commercial, HR, tax, with consistent file naming and nothing missing that a buyer would reasonably expect to find. A disorganised one, where key contracts are scattered across email threads and shared drives, slows the process down and quietly signals that the same disorganisation may exist elsewhere in the business.
Get started now on your data room
Founders do not need to wait for a live sale process to start building one. Set up the folder structure now. Populate it gradually as documents are created or renewed. This action turns a task that would otherwise take weeks under pressure into an occasional half-hour of filing. When a genuine buyer conversation begins, the difference between having this ready and starting from nothing is frequently the difference between a due diligence process measured in weeks rather than months.
Legal housekeeping: the due diligence checklist
Beyond the numbers, buyers work through a substantial legal checklist covering the operational health of the business. Bevington’s list, drawn from years of running these processes, covers several areas founders consistently underprepare for.
Companies House and PSC register
Buyers check the company’s own records against what’s actually on public record. This means reviewing Companies House filing history for gaps or overdue filings, alongside the register of people with significant control, which needs to be accurate and current rather than reflecting an outdated ownership picture. A mismatch here is one of the quicker things a buyer’s solicitor checks, and one of the easier things for a founder to get ahead of.
Contracts and change-of-control clauses
Material contracts need to be current and easily located. Contracts that expired years ago and were simply never renewed formally are a common finding, and one that raises immediate questions about what else has been left unmanaged. For agencies specifically, client contracts deserve close attention for change-of-control clauses, terms that allow a client to walk away or renegotiate the moment ownership changes. A buyer who spots several key clients with this clause in place will treat it as a real risk to the revenue they are paying for, not a technicality.
Intellectual property and data protection
Intellectual property protection is checked, particularly for agencies whose value sits heavily in brand, creative work, or proprietary processes. Data protection compliance is examined closely, alongside modern slavery and anti-bribery policies, both of which are now standard expectations rather than optional extras, depending on the deal structure and circumstances of the business. Increasingly, this scrutiny extends to cybersecurity practices too, including whether the business has any history of breaches or incidents.
IT systems and software
Buyers increasingly look at the tools an agency actually runs on: project management, creative, hosting and collaboration platforms. The key question is ownership and portability rather than functionality, whether these accounts sit with the business or with a founder personally, and whether licences and subscriptions actually transfer to a new owner or need renegotiating from scratch. A platform the agency depends on daily but doesn’t technically control is exactly the kind of gap that surfaces late and causes delay.
Employment, pensions and TUPE
Employment due diligence carries its own weight. Licences and permits relevant to the business need to be in place and current, and pensions auto-enrolment, health and safety practices, and working time regulations are all checked. Where the sale is structured in a way that transfers employees, TUPE, the Transfer of Undertakings (Protection of Employment) regulations, governs what happens to their contracts and continuity of employment, and getting this wrong creates liability that survives the sale itself. Where TUPE applies, the outgoing employer must provide Employee Liability Information in writing no less than 28 days before the transfer completes.
None of these individually will usually kill a deal. Collectively, though, unresolved issues across several of these areas signal a business that has not been properly managed, and that perception affects both the buyer’s confidence and, often, the price they are willing to pay.
The value of a due diligence checklist
The practical fix is straightforward in principle: work through a due diligence checklist well before a sale process begins, treating it as ongoing business housekeeping rather than a task to complete once a buyer is found.
Tax due diligence: the area sellers most often overlook
Tax due diligence tends to get less attention from founders than legal or financial due diligence, largely because it feels like something their accountant already handles day to day. Buyers look at it closely regardless. Historic PAYE and National Insurance compliance is checked, along with VAT treatment on cross-border or agency-specific transactions (if applicable), which can be more complex than founders assume once international clients or subcontractors are involved. Where a business has claimed R&D tax credits, buyers will want to confirm the claims were properly substantiated, since HMRC clawback on an invalid historic claim becomes the buyer’s problem the moment the deal completes, and they will price that risk in if it looks uncertain.
Benefit-in-kind reporting is another area that catches sellers out, particularly around company cars, health insurance, or informal perks that were never run through payroll correctly. None of these issues are usually large enough to stop a deal on their own. Collectively, an accumulation of small tax irregularities creates the same impression as untidy legal housekeeping: a business that has not been tightly run, which buyers factor into both timeline and price. The extent to which tax due diligence is required will depend on the deal structure and business circumstances.
How long due diligence typically takes
There is no fixed timeline, since it depends heavily on the size of the business, how many shareholders are involved, and how prepared the seller is going in. As a general guide based on the range of transactions we see agency founders go through, a straightforward sale of a smaller owner-managed agency can move through due diligence in eight to twelve weeks where the seller is well prepared. Larger transactions, or those involving private equity buyers running a more thorough process, commonly take three to six months. The single biggest variable within a founder’s control is preparation. A seller who can answer requests within days rather than weeks consistently moves through the process faster than one who cannot, regardless of the size of the deal.
Delay is the enemy
Bevington puts it simply: “delay is the enemy of the corporate transaction.” If a business is not prepared to answer due diligence questions quickly, the natural consequence is delay, and delay creates space for new problems to surface. A slower process gives market conditions more time to change, gives the buyer more time to reconsider, and gives any issue that does emerge more time to compound rather than being resolved and moved past.
The risk is not hypothetical. Businesses mid-sale when Covid hit in 2020 found that a process running behind schedule, for reasons entirely unrelated to the deal itself, was suddenly exposed to a level of disruption nobody could have planned for. Some of those sales likely would have completed successfully had they been running to the original timeline. Preparation is the only real lever a seller has over how long the process takes, since the legal and financial process itself does not meaningfully shorten no matter who is buying.
Shareholder alignment before you start
Where a business has multiple shareholders, internal alignment matters more than most founders expect going into a sale. The process becomes noticeably more complicated when shareholders want different outcomes from the same transaction. Some may be exiting completely and looking to retire, while others may be reinvesting part of their proceeds and staying on to work for the buyer. Those two groups have genuinely different interests in how the deal is structured, and that difference can create real tension during negotiations if it has not been worked through beforehand.
The most complicated sales tend to be exactly this scenario: sellers with materially different goals, discovering their misalignment midway through a process that assumed everyone wanted the same thing. Getting shareholders aligned on what they actually want from a sale, before advisers and lawyers are engaged, removes one of the more avoidable sources of friction in an already demanding process.
Why earn-outs often don’t pay out in full
Earn-outs are commonly used to bridge the gap between what a seller believes the business is worth and what a buyer is willing to pay upfront. In practice, they frequently fail to pay out in full, and the reasons are fairly consistent across deals.
Post-completion performance dips
A post-completion dip in performance is extremely common. Running a business and selling it at the same time are both demanding roles, and something usually gives during the sale process. Inevitably, it is the day-to-day running of the business that absorbs less attention while the owner is consumed by the transaction itself, and that dip in focus shows up in performance figures during exactly the period an earn-out is measured against.
Integration risk
Integration risk compounds this further. Nobody can fully predict how two businesses will work together once combined, and a seller’s assumptions about what the business could achieve post-completion are frequently disrupted by decisions the buyer makes about how to run things afterwards. Even carefully drafted contractual protections cannot fully account for this.
The practical guidance that follows is worth taking seriously: treat an earn-out as icing on the cake, not as the cake itself. A deal that only makes sense if the earn-out pays out in full is a deal built on an assumption that, more often than not, will not hold.
From findings to contract: warranties, indemnities, and what actually kills deals
Due diligence findings do not disappear once they are raised. The buyer’s advisers document them in a due diligence report, and each issue then gets addressed one of three ways: it is fixed before completion, it is reflected in a lower price, or it is written into the sale and purchase agreement as a warranty or an indemnity. A warranty is a statement the seller confirms is true, giving the buyer grounds for a claim if it later proves false. An indemnity is more direct protection against a specific, already-identified risk, effectively an agreement that the seller will cover a defined cost if it materialises.
Once a sale reaches this stage, relatively few deals actually collapse, largely because most problems uncovered during due diligence have a workable solution through one of those three routes. What does end deals is disagreement over who bears the cost of a problem once it has been found. If due diligence surfaces a liability the buyer did not expect, and the buyer wants a price reduction or a specific indemnity to cover it, a seller may decide they would rather trade through the issue and return to the market in a couple of years than accept those terms now.
This distinction matters because it corrects a common assumption. Founders often expect the deal-breaking moment to be the discovery of a serious problem. More often, it is the negotiation over responsibility for that problem, and how it gets reflected in the contract, that decides whether a deal proceeds or falls apart.
The role of a fractional CFO during due diligence
A fractional CFO’s role in this process is largely translation and coordination. Buyers, lawyers, and accountants each ask questions in their own language, and a founder without a finance background can lose days trying to work out what a request for “normalised working capital” or “Quality of Earnings adjustments” actually requires them to produce. A fractional CFO who already understands the business’s numbers can turn those requests into a clear list of what needs pulling together, and by whom, rather than leaving the founder to interpret unfamiliar terminology while also trying to run the business.
There is also a defensive function. When a buyer’s financial due diligence team raises a question about margin variance or an unusual cost line, having someone who already understands why that variance exists, and can explain it credibly and quickly, prevents a minor query from becoming a drawn-out investigation. Founders who go into due diligence without this support often find themselves fielding technical financial questions directly, under time pressure, without the context to answer them convincingly. That is precisely the kind of friction that turns a four-week query into a twelve-week one.
Getting ahead of it: preparation, not panic
Bevington was candid on this point: bringing lawyers in earlier than founders typically manage would help, but in his experience, it is not uncommon for a seller to call only once a buyer has already been found. At that point, much of the groundwork that would have made the process smoother has not been done.
The same applies to financial preparation. Getting comfortable with monthly management accounts, understanding how EBITDA will be assessed and adjusted, and addressing legal housekeeping gaps are not tasks that belong exclusively to the run-up to a sale. They are simply good business practice that happens to make a future sale considerably less stressful when the time comes. Founders who treat financial and legal discipline as an ongoing habit, rather than something to fix once a buyer appears, consistently find due diligence a far less disruptive process than those who do not.
This article is intended for general information and does not constitute legal, tax, or financial advice. Every sale process is different, and founders should take advice from a qualified solicitor and accountant on their specific circumstances.
Frequently Asked Questions
What does due diligence mean in a business sale?
Due diligence is the process a buyer goes through to verify that a business matches what they have agreed to pay for, checking financial, legal, and tax records before completing the deal. It exists because the price and terms are agreed before the buyer has had the chance to confirm the detail behind them.
How long does due diligence usually take?
A straightforward sale of a smaller, well-prepared agency typically takes eight to twelve weeks. Larger deals, or those involving private equity buyers, commonly take three to six months, with preparation being the biggest factor a seller can control.
What documents should a business have ready for due diligence?
Buyers typically expect several years of management and statutory accounts, a breakdown of revenue and margin by client, aged debtor and creditor listings, payroll records, employment contracts, and any loan or lease agreements. Having these organised in a data room before a sale process starts significantly shortens the time due diligence takes.
Can a deal fall through during due diligence?
Relatively few deals collapse once they reach due diligence, since most issues that are found have a workable solution through a price adjustment, a warranty, or an indemnity. Deals are more likely to fall apart when the buyer and seller cannot agree on who bears the cost of a problem, rather than because of the problem itself.
Glossary of Due Diligence Terms
Asset purchase
A sale structure where the buyer takes specific assets and contracts rather than the company itself, leaving most historic liabilities behind with the seller.
Data room
The organised, secure store of documents a buyer’s team works through during due diligence, usually the first thing that signals how well-run a business actually is.
Earn-out
Deferred payment tied to the business hitting agreed targets after completion, used to close the gap between what a seller wants and what a buyer will commit upfront.
Heads of Terms
The document that sets out the agreed price and key terms of a sale before due diligence formally begins.
Indemnity
A specific promise to cover a defined, already-known cost or risk, agreed separately from the general warranties in a sale contract.
NDA (Non-Disclosure Agreement)
The confidentiality agreement a buyer signs before a seller opens up sensitive financial and client information.
Quality of Earnings (QoE)
A buyer’s review of reported profit that strips out one-off and non-recurring items, arriving at a cleaner picture of what the business will likely earn going forward.
Share purchase
A sale structure where the buyer acquires the company itself, including its full trading history and any liabilities that come with it.
TUPE
UK employment law that protects staff contracts and continuity of service when a business changes hands.
Warranty
A factual statement the seller stands behind in the sale contract, giving the buyer a claim if it later turns out to be false.
About the Author
ACC Finance Solutions provides fractional CFO leadership to scaling UK service and agency businesses. Founder Adam Cooper (ACMA) with over 20 years finance experience hosts The Fractional CFO Show, where the ACC team’s advisory experience, including the financial due diligence readiness covered in this article, is drawn from direct work with agency founders preparing for exit. To discuss preparing your business for a sale, book a call with Adam.
Sources
The Fractional CFO Show: Delayed Deals are Risky, with Paul Bevington
ICAEW: Support for due diligence
