Why successful transactions start long before the deal

For many owner-managed businesses, due diligence is the first time someone has looked at the business in detail from the outside. 

Buyers aren’t simply assessing profitability. They’re trying to understand how the business has been run, whether decisions have been properly documented and where any future risks might lie. 

Questions that may never have arisen internally suddenly become important. 

Why was the business structured in a particular way? Are shareholder arrangements still appropriate? Have historic tax decisions been clearly documented? Are related-party transactions easy to understand? 

“Owners naturally look at decisions in the context of running their business day to day,” says Marketa. “A buyer is looking at exactly the same information but asking a different question: ‘Does this create uncertainty or additional risk for me?'” 

Many technical issues don’t prevent transactions from happening. 

What they often do is create additional questions. 

A gap in documentation, an historic restructuring or uncertainty around ownership arrangements may prompt buyers to carry out further investigations, seek additional assurances or revisit assumptions they’ve already made. 

Sometimes that leads to a longer due diligence process. 

Sometimes it affects deal terms. 

And occasionally it influences the value a buyer is prepared to place on the business. 

“It’s rarely the technical issue itself that causes the biggest challenge,” explains Marketa. “It’s what that issue signals. Buyers want confidence that the business has been well managed. If they start finding unanswered questions, they’ll naturally begin asking more.” 

Due diligence has become significantly more detailed in recent years.

Professional buyers and investors now expect stronger governance, more comprehensive documentation and greater transparency than many businesses have historically maintained.

That doesn’t mean businesses need to be perfect.

But it does mean owners should understand where questions are likely to arise and be prepared to answer them confidently.

Areas that frequently come under scrutiny include:

• Ownership and group structures
• Shareholder agreements
• Tax compliance and historic planning
• Property ownership
• Employee incentive arrangements
• Related-party transactions
• Commercial contracts and governance documentation

Reviewing these areas early often provides far greater flexibility than trying to resolve issues once a transaction is already underway.

One of the biggest advantages of preparing early isn’t necessarily fixing every issue. 

It’s understanding where the potential pressure points are. 

A joined-up review across tax, legal and commercial considerations allows owners to distinguish between matters requiring immediate action, areas that simply need documenting more clearly and issues that can be monitored over time. 

“The earlier we start working with clients, the more options they usually have,” says Marketa. “If you’ve got two or three years before a transaction, there’s often plenty of time to strengthen structures, improve documentation and deal with issues in a controlled way. That’s very different from trying to solve everything once due diligence has begun.” 

When owners think about technical issues, it’s easy to assume the only consequence is a lower valuation. 

In reality, the impact can be much broader. 

Issues identified during due diligence can delay completion, change the structure of a transaction or lead to requests for warranties, indemnities, or funds to be held back until risks have been resolved. 

For many business owners, that’s often more disruptive than the financial implications alone. 

“Selling a business is one of the biggest moments in an owner’s life,” says Marketa. “It’s not just a financial transaction. It’s years of work, relationships and personal investment. Good preparation helps owners stay in control of the process, rather than reacting to issues as they arise.”

Whether a transaction is planned in the next year or still several years away, there is real value in taking an objective look at the business today.

Questions worth considering include:

• Are there historic tax, legal or structural issues that would benefit from review?
• Are key commercial arrangements properly documented?
• Have changes to the business over the years been reflected in its legal structure?
• Could ownership or shareholder arrangements make a future transaction more complicated?
• If due diligence started tomorrow, where would buyers focus first?

These aren’t questions to create concern. They’re questions that help owners prepare from a position of strength.

The most successful transactions rarely happen because every aspect of the business is perfect. 

They happen because owners understand their business, identify potential issues early and address the areas that are most likely to matter. 

“Preparation isn’t about eliminating every risk,” concludes Marketa. “It’s about understanding your business well enough that nothing comes as a surprise. When owners do that, they go into a transaction with far greater confidence and far more control over the outcome.”

If you’d like some more information, speak to your usual Old Mill adviser or contact Marketa Pasova today.