The short answer
Financial, commercial, legal, tax and employment information should be organised before buyers are approached. A prepared company creates confidence, reduces diligence adjustments and is better able to defend value.
Preparation checklist
| Area | Prepare | Why it matters |
|---|---|---|
| Financial | Accounts, normalised EBITDA, debt, cash and working capital | Supports valuation |
| Commercial | Customers, contracts, churn, pipeline and concentration | Shows revenue quality |
| Legal | Contracts, powers, disputes, licences and IP | Reduces contingencies |
| Tax | Returns, audits, losses and related-party transactions | Limits tax risk |
| Employment | Contracts, pay, incentives and key managers | Anticipates integration risk |
1. Put the numbers in order
A buyer needs to understand sustainable earnings. Prepare three years of profit and loss statements, balance sheets, debt, cash, exceptional costs, capex, working capital and a clear explanation of material variances.
- Reconcile statutory accounts, management reporting and tax returns.
- Bridge reported EBITDA to normalised EBITDA.
- Explain debt, debt-like items, cash and working-capital requirements.
- Support the forecast with verifiable commercial and operational assumptions.
2. Reduce founder dependency
A company is more valuable when it can operate without the owner making every decision. Document processes, strengthen the second line, formalise customer relationships and demonstrate leadership continuity.
3. Anticipate difficult questions
- Which customers might leave after a change of control?
- What happens to margin if wages or input costs rise?
- Which contracts are unsigned or close to expiry?
- Which tax, employment or legal contingencies exist?
- What investment is required to sustain the growth plan?
What the data room should contain
A data room should not be a disordered folder. It should tell a coherent story: reliable results, identified risks, located contracts and defendable growth.
| Folder | Core evidence |
|---|---|
| Corporate | Constitutional documents, shareholders, powers and governance |
| Financial | Accounts, reporting, debt, cash, capex and working capital |
| Commercial | Customers, contracts, pipeline, pricing and concentration |
| Tax | Returns, audits, losses and related-party transactions |
| Employment | Workforce, contracts, incentives, disputes and key managers |
| Legal and regulatory | Licences, disputes, insurance, IP and compliance |
When to start
Ideally, preparation starts around twelve months before launch. If less time is available, a focused four-to-eight-week review can still improve information quality and reduce negotiation surprises.
Recommended horizon for correcting risk, organising evidence and preparing the investment story.
Frequently asked questions
Common questions about this topic.
When should preparation begin?
Ideally six to twelve months before launch. With a shorter timetable, prioritise financial evidence, critical contracts and issues that may affect price.
What does a buyer request during due diligence?
Accounts, management reporting, debt, cash, customer and supplier contracts, employment information, tax, disputes, licences, intellectual property and a clear risk register.
What increases value before a sale?
Reliable information, low founder dependency, diversified customers, formal contracts, a stable leadership team and profitable, defendable growth.
What is a data room?
It is the secure, organised repository reviewed by buyers and advisers. Its quality affects speed, confidence and negotiation.
Author · Feridian Research
Content produced by Feridian Research for information purposes. It is general in nature and does not replace advice based on a company’s specific facts and objectives.