Buying a business? Things to look out for in your due diligence

September 16, 2025

Buying a business? Things to look out for in your due diligence

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By Siobhan Williams

Read time: 4 minutes

When you are buying a business, due diligence is one of the most important elements of the process.

When acquiring a business, due diligence enables you to get a good understanding of your target business, assess risk levels, and make informed decisions in relation to the acquisition. Where transactions are high-value and often cross-sector, the legal due diligence process is more important than ever.

Our corporate solicitor, Siobhan Williams, sets out the essential elements of due diligence, highlights common pitfalls, and provides practical guidance on how to conduct a thorough due diligence review to support your business goals and help to mitigate risks.

Why due diligence matters

Due diligence is about more than just ticking boxes. It is a useful tool in identifying any legal, financial, commercial or operational risks that could derail a deal. Without it, buyers risk inheriting liabilities or missing out on critical deal terms which could be used to protect them.  Ultimately, if your target business has skeletons in the cupboard, a thorough due diligence should reveal them giving you the opportunity to renegotiate the terms or ultimately walk away from the acquisition.

Key areas of legal due diligence

• Corporate structure and governance: Are the company’s records in order? Are there any shareholder disputes ongoing? This can delay completion, impact valuation or make certain deal structures unfeasible.
• Commercial contracts: It’s important to review any material agreements and customer/supplier relationships.  If the target business is overly reliant on a small number of customers, this can be a risk to the business.  Check whether key clients are tied into contract arrangements – and whether the transaction would enable any key customers and suppliers to terminate their contracts.
• Employment law & HR: Understanding workforce composition, reviewing employment contracts and handbooks, and identifying potential claims or TUPE implications.
• Intellectual Property: Confirming ownership and validity of intellectual property rights, licensing arrangements, and domain names.  This can be a key factor depending on the nature of the target business.
• Litigation and compliance: Checking for ongoing or imminent disputes, regulatory compliance, and exposure to sanctions.
• Commercial property/real estate: Reviewing details of company premises, leases, ownership rights, and title documents. Defects in title or unfavourable lease terms can impact operational flexibility and require renegotiation.
• IT systems and data protection: Ensure you have a good assessment of the target’s IT infrastructure, including a review of any IT contracts which can often have long tie-ins.  Data protection is also an important issue and it’s important to ensure that the target has robust policies in place, including related to data security.
• Financial and tax: A robust assessment of the financial performance of the target together with any potential tax issues are a vital part of a buyer’s due diligence.  It’s important to instruct a good accountant or corporate finance advise who can assist with these issues.

Common red flags

There are a number of red flags that can be uncovered during the due diligence process. It is for this reason that the process is so important to complete thoroughly. A few of the most common red flags to consider include:

• Lack of documentation or missing contracts, which may indicate poor governance or expose the buyer to unquantifiable risks.
• Unresolved litigation, employment claims or regulatory issues which can stall completion or require costly settlements.
• Infringement or misuse of third-party IP

Identifying these early allows buyers to negotiate adjustments to price, indemnities, or deal structure.

Getting it right

Due diligence is often time-consuming, but is an indispensable part of any transaction, and getting it right is crucial. Seeking legal advice early allows for a targeted and efficient review of yours, or the target company. Use a tailored due diligence checklist and collaborate closely with tax, financial and legal advisors to ensure nothing is missed.

A well-executed due diligence process builds confidence, strengthens negotiation positions, and helps avoid costly surprises post-completion.

If you’re considering buying or selling a business, due diligence is crucial to get right at the outset. For a free no obligation discussion with  our M&A team, get in touch using the contact form or on 02920 829 100.