What Buyers Are Really Looking for During Due Diligence

When a buyer expresses interest in acquiring your business, due diligence becomes the defining stage of the deal. It’s more than just a checklist exercise—it's a forensic process that validates value, uncovers risk, and determines whether the transaction moves forward, stalls, or collapses altogether. 

At Prerad Advisory, we’ve worked on both sides of the table and can confidently say: what buyers want isn’t just numbers—it’s confidence. 

So, What Are Buyers Really Looking For? 

1. Sustainable Earnings and Quality of Revenue 

Buyers are laser-focused on recurring revenue, customer retention, margin stability, and seasonality. They want to understand not just what your revenue is today—but how defensible and scalable it is tomorrow. 

Tip: Be ready to explain concentration risk (e.g. top 3 customers) and any unusual spikes in revenue. 

2. Clean and Reconciled Financials 

Inaccurate or poorly structured financial records are red flags. Buyers will test the reliability of your numbers, comparing management reports to statutory accounts, tax filings, and cash flows. 

Tip: Ensure your financials are reconciled, consistently formatted, and bridge easily to tax returns and bank statements. 

3. Normalised EBITDA and Adjustments 

Expect scrutiny on your “true” earnings. Buyers will remove one-off costs, personal expenses, or non-operational items, but will also challenge overly optimistic add-backs. 

Tip: Prepare a defensible and well-documented normalisation schedule—don’t leave it to the buyer to interpret. 

4. Operational Dependency and Key People 

Is the business reliant on the owner or a handful of individuals? Buyers want to know whether the business can continue operating smoothly post-sale, especially if you're exiting. 

Tip: Document processes, build out the second layer of leadership, and highlight team capability. 

5. Tax, Legal, and Compliance Exposure 

Buyers will review historical tax compliance, pending disputes, employment contracts, leases, and IP ownership. Any uncertainty here translates into risk—and often, a lower price or delayed close. 

Tip: Clean up legacy issues early. A small tax problem now becomes a bargaining chip later. 

6. Working Capital and Cash Flow Health 

Buyers want a clear picture of the business’s working capital cycle—receivables, payables, inventory, and cash management. These directly impact the price via working capital adjustments. 

Tip: Demonstrate strong cash conversion and stable working capital trends. 

7. Growth Potential (Backed by Strategy) 

A growth story is important—but it must be supported by data. Buyers are looking for expansion opportunities that are realistic and underpinned by a solid business model. 

Tip: Have a simple forecast model with assumptions clearly articulated and achievable. 

What Kills Deals? 

• Lack of transparency or withheld information 

• Inconsistent data across reports 

• Unresolved legal issues 

• Aggressive adjustments to earnings 

• Poor documentation of key contracts or assets 

Final Thoughts 

Due diligence is not about perfection—it’s about preparation and credibility. A well-prepared vendor builds trust and moves the deal forward faster and with fewer surprises. 

At Prerad Advisory, we help business owners get ahead of the curve—by preparing your business before the buyer’s diligence team arrives. 

If you're thinking about a future exit or currently engaging with potential acquirers, get in touch. The earlier you start, the more value you preserve.