Budget 2026: what it means for you and your business —
In short
Financial due diligence is an independent examination of a target company’s financial position before you commit — earnings quality, working capital, debt and debt-like items, tax exposures and key risks. It gives you an evidence base to renegotiate the price, restructure the deal, or walk away. For sellers, vendor due diligence finds and fixes the problems before a buyer uses them against you.
Quality of earnings. Are the profits real, sustainable and repeatable? Sellers present adjusted EBITDA with add-backs that flatter it. We strip those back and test what the business will genuinely earn for you.
Working capital. How much cash does the business need just to keep running? Getting the working capital target wrong in the deal is one of the most common and expensive errors — buyers routinely find they must inject cash on day one.
Debt and debt-like items. Not just the loans — also finance leases, unpaid tax, deferred consideration on past deals, dilapidations, unfunded pensions. Anything that behaves like debt reduces what the equity is worth.
Tax exposures. Historic positions the buyer would inherit on a share purchase.
Customer, supplier and revenue analysis — concentration, churn, contract terms.
It is diligence you commission on your own business before going to market.
It does two things. It finds the problems before the buyer does — so you can fix them, or at least prepare an answer, rather than being ambushed mid-process. And it speeds up the deal, because a buyer working from a credible vendor report has less to discover.
Both protect the price. A buyer who discovers a problem uses it to renegotiate; a buyer who is told about a problem up front, with the fix already in hand, usually doesn’t.
In our experience, the recurring findings are:
Owner remuneration and personal expenses running through the business. Working capital that has been squeezed to flatter the cash position before a sale. Revenue recognised early, or one-off revenue presented as recurring. Customer concentration understated in the information memorandum. Unrecorded liabilities — accrued holiday, dilapidations, tax positions. Related-party transactions on non-commercial terms.
None of these necessarily kills a deal. All of them change the price.
Due diligence costs a fraction of the purchase price, and it is the last point at which you can still walk away for the cost of the fees. The most expensive diligence is the one you decided to skip.
We know what sellers leave out — because we act on both sides of deals.
Working capital done properly — the most common and expensive thing buyers get wrong.
Vendor DD too — find and fix your own problems before a buyer prices them in.
Findings you can negotiate with — evidence, not opinions.
Chartered (ICAEW) and independent.
This page provides general information about the 2026/27 UK tax year and is not advice on your particular circumstances. Tax and regulatory rules change frequently. Please contact us before acting, or refraining from acting, on anything set out here. LMJ Group is a firm of Chartered Accountants regulated by the ICAEW. LMJ Group is not a registered auditor and does not provide audit services. Last reviewed: July 2026.
