Common errors in the due diligence process and how to avoid them
Rahid Rashid, 14 October 2025
Rahid Rashid, 14 October 2025
Over the years I have seen countless deals delayed, renegotiated or even collapse because of issues uncovered in the due diligence process. This can be disheartening, especially given the initial excitement that directors and shareholders may be feeling, but the process is designed to protect you from risk.
What strikes me is that many of these problems could have been avoided with better preparation. When buyers and sellers underestimate due diligence, they risk value leakage, wasted time and unnecessary stress. Honesty is the best starting point, but sometimes it isn’t just a lack of transparency that sinks a deal.
One of the most common issues we encounter is incomplete or poorly presented financial information.
I have seen deals where the management team assured the buyer that their forecasts were robust, only for inconsistencies to appear between management accounts and statutory filings.
This undermines confidence and results in weeks of clarification. This frustration causes distrust that can bring a premature end to negotiations.
The lesson? Ensure your numbers tie up well before you open the books. Consistency between management information, tax filings and statutory accounts is essential.
It never hurts to conduct a period of management accounts, or even audits, prior to a deal if you are looking to sell to give buyers confidence in your numbers.
Another frequent stumbling block is unresolved tax issues. I have seen HMRC correspondence surface mid-deal that management thought was “nothing to worry about.”
To a buyer, outstanding tax liabilities or unclear VAT positions raise red flags. No one wants to add risk into the deal, especially where outcomes are unclear.
If you are looking to sell, it may help if you commission a tax review to flush out potential issues and put remedial measures in place.
Suppliers, customers and employees are at the heart of any business, yet key contracts are often missing or out of date when due diligence begins.
You don’t want to find that “long-standing customer agreements” are founded on little more than a handshake or a quick email.
In instances like this, buyers may want to renegotiate and formalise terms, especially if it is a critical supplier or customer, which could delay a transaction.
Formalising contracts in advance provides reassurance and keeps the timetable on track.
Equally, if the business being sold has significant legal obligations or ongoing disputes, it is important that these are made clear to buyers and that both parties seek independent legal advice.
While due diligence focuses heavily on numbers and contracts, operational realities and culture are often overlooked.
I have seen acquirers walk away when they realised staff retention risks were greater than disclosed or that members of the leadership team who remain, feel bitterness.
Sellers should anticipate these questions and consider how dependent the business is on a handful of individuals and what incentives are in place to retain them.
Buyers should also probe these areas early to avoid surprises. A large part of the value in many businesses, particularly those in the service sector, are its people.
The solution is simple in theory but demanding in practice: preparation. Treat due diligence as if it were starting tomorrow. Put your house in order—tidy up records, resolve tax positions, formalise contracts and think through people risks. On the buy-side, invest in thorough due diligence advisors who know where problems typically hide.
From experience, deals run far more smoothly when both sides take due diligence seriously. Not only does it save time and money, it builds trust between buyer and seller. And in corporate finance, trust is often the deciding factor in whether a deal completes.
If you are preparing for a sale or considering an acquisition, don’t wait until due diligence begins to uncover issues. The earlier you start preparing, the smoother your deal will run and the stronger your negotiating position will be. For a confidential conversation on how we can help you avoid these common pitfalls and guide you through a successful transaction, please get in touch with Partner, Rahid Rashid (rahidrashid@lubbockfine.co.uk).
