Before due diligence: seven things an investor will ask for
A well-prepared data room shortens a deal by weeks and protects the price. A poor one reopens negotiations.
In every transaction, whether you are selling a stake, raising investment or buying a company, the moment comes when the other side says: "Send us the documents." Those who are ready negotiate. Those who aren't, explain. These are the things that are always requested.
1. Three years of financial statements
Audited if you have them, together with the corporate tax reconciliation. Every major one-off item needs a short explanation.
2. Monthly management accounts
Investors want to see trend and seasonality, not just the annual total. A monthly P&L that ties back to the books is worth its weight in gold.
3. Normalised EBITDA
Which costs are one-off, and which are owner costs that disappear after the deal? If you don't prepare this, the other side will, in their favour.
4. Working capital
Aged receivables, inventory and supplier payables. The final price most often breaks around the "normal" level of working capital.
5. Debt and off-balance-sheet items
Loans, leasing, guarantees, sureties and disputes. Anything that can turn into cash going out.
6. Customer concentration and contracts
How much revenue do your largest customers carry, and what do the contracts say about a change of ownership?
7. Tax, employees and permits
Tax audits, employment contracts and key permits. Small gaps here become big items in the warranties.
Tip: run an internal "vendor due diligence" before you open the data room. A problem you find yourself is your story. A problem the investor finds becomes their argument for a lower price.