What Happens After I Accept an Offer? A Seller's Guide to Due Diligence

What Happens After I Accept an Offer? A Seller's Guide to Due Diligence

James Dixey — Founder and Managing Director    ·    9 min read    ·    James Dixey Limited

You've accepted an offer and signed heads of terms. The next eight to twelve weeks decide whether the deal completes — at the price you've agreed, or at a price that gets renegotiated. Here is what to expect, and where the work actually is.

EXECUTIVE SUMMARY

•  Due diligence typically runs 8–12 weeks from heads of terms to completion for a typical £3–15m EV regulated business. Eight weeks for well-prepared simple businesses; twelve for those with multiple sites or complex ownership structures.

•  Four workstreams run in parallel: financial (deepest), legal (regulatory licences are core assets), commercial (revenue quality), and operational (key-person risk and process documentation).

•  The single biggest variable in DD speed is not the buyer's diligence team — it is how quickly the seller can respond to information requests. A well-organised data room and a disciplined query log routinely shave three to four weeks off the timeline.

•  W&I insurance is now common on UK mid-market deals from roughly £5–15m EV upwards, with the cost typically borne by the buyer. It significantly reduces the seller's post-completion warranty exposure and should be discussed early in the process — it does extend down into the £3–5m range for clean profiles where insurers are willing, but the economics tighten as deal size falls.

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You've accepted an offer. Heads of terms are signed. The buyer's exclusivity period has started. What happens now — and how do you protect the price you've agreed?

Due diligence is the phase of a sale process where most deals get re-traded, and where some die altogether. It is also the phase where having a clear sense of what the buyer is actually doing — and why — most reduces the seller's anxiety. This piece walks through what to expect, where the work actually is, and what a good advisor does through this phase to protect the seller.

What buyers are actually looking at

A typical buyer's diligence covers four workstreams running in parallel.

Financial diligence

This is the deepest workstream and the one that takes longest. The buyer's accountants will rebuild your last three years of trading from the ground up: revenue by customer / segment / month, gross margin movement, EBITDA bridge from reported to adjusted, working capital cycle, capital expenditure history, debt schedule, deferred revenue treatment, and the integrity of the management information. Expect them to challenge every normalising adjustment, want supporting evidence for owner remuneration normalisation, and rebuild any complex revenue recognition from first principles.

Legal diligence

The buyer's lawyers review the corporate structure, share register, material contracts, employment documentation, property arrangements, intellectual property, regulatory licences and any litigation or disputes. For regulated businesses, the regulatory pack is treated as a core asset class — CQC registration history and conditions, Ofsted reports and registered manager continuity, BAFE / NSI / SSAIB / FIRAS accreditation currency, UKAS scope schedules. Anything that requires re-registration on completion gets identified here and project-managed against the SPA.

Commercial diligence

Often run by a sector-specialist consultancy on behalf of the buyer, sometimes done in-house. Commercial diligence is about the quality of the revenue, not the quantity: customer retention rates, contract length, renewal mechanics, market share trajectory, pricing trends, competitive position, and the structural growth (or contraction) of the underlying market. Owners often find this workstream the most uncomfortable, because it tests assumptions about the business that the seller has held for years.

Operational diligence

How does the business actually run on a Tuesday morning? Operational diligence looks at the management team, key-person dependency, IT systems and resilience, supplier concentration, HR and payroll integrity, and the practical question of whether the business will continue to perform after the owner leaves. In owner-managed businesses, this is the workstream where the second-tier management layer most clearly proves its worth — or its absence.

How long does it take?

Eight to twelve weeks from signed heads of terms to completion is the typical range for a £3–15m EV regulated business. Eight weeks is achievable for well-prepared, single-site, simple-ownership businesses with a clean data room. Twelve weeks is normal for multi-site groups, businesses with property complexity, or businesses where regulatory transfers (CQC change-of-provider, Ofsted re-registration) need to run in parallel.

The single biggest variable is not the buyer's diligence team. It is how quickly the seller can respond to information requests. A well-organised data room with the obvious documents already loaded, plus a disciplined query log where requests are turned around in 48 hours, routinely shaves three to four weeks off the timeline. A poorly organised seller responding slowly can stretch a process from eight weeks to sixteen — and every additional week is an opportunity for the buyer to find a reason to retrade.

The single biggest variable in due-diligence speed is not the buyer's diligence team. It is how quickly the seller can respond to information requests.

The data room: your most important preparation

A data room is a secure online folder containing every document the buyer's team needs to complete diligence — typically Datasite, Intralinks, Firmex or SecureDocs for larger transactions, or a well-organised Dropbox or Google Drive folder for smaller ones. For regulated-sector deals, the lower-end platforms can be inadequate because some documents (CQC inspection histories, individual employee DBS records, safeguarding files) need genuinely strict permission controls. Get the platform decision right before populating the room.

A well-organised data room follows the diligence structure: a Finance folder with three years of management accounts, statutory accounts, tax returns and working papers; a Legal folder with the share register, material contracts, employment documentation and property leases; a Commercial folder with customer concentration analysis, pipeline data and market positioning; an Operations folder with staff lists, organisational charts and process documentation; a Regulatory folder with every relevant licence, registration, inspection report and accreditation certificate. Buyers' diligence teams move noticeably faster — and ask noticeably fewer querulous questions — through a data room that respects their workflow.

Warranties, indemnities, and W&I insurance

The SPA will contain warranties (statements about the business that, if untrue, give the buyer a claim) and indemnities (the seller's commitment to cover specific identified risks). These are heavily negotiated, and the negotiation happens through diligence — not after.

W&I insurance has become common on UK mid-market deals above roughly £15m enterprise value, with the cost typically borne by the buyer in the current market. It is increasingly available down to roughly £5m, and in selective cases down to £3m for the right deal profile (clean financials, low complexity, well-pitched warranty package) — though economics tighten and exclusions broaden as deal size falls. Worth raising with your adviser early in the process rather than discovering the option late. W&I significantly reduces the seller's personal post-completion exposure and is one of the more important structuring conversations to have in the first week of diligence.

Where deals die in due diligence

Three patterns account for most diligence-stage collapses. First, financial surprises: an adjustment in the EBITDA bridge that turns out to be undocumented, a customer concentration that emerges from segment analysis, working capital movement that contradicts the seller's narrative. Second, regulatory surprises: an inspection report or enforcement action that hadn't been disclosed, an accreditation about to lapse, a licence the buyer can't transfer cleanly. Third, behavioural surprises: the seller becomes defensive or evasive under questioning, the buyer concludes that what's been presented is not the full picture, and trust breaks down.

The fix for all three is the same. Disclose the issue early, before the buyer finds it. A disclosed issue is something to negotiate around; a discovered issue is something to walk away from. Owners who treat the data room as an exercise in selective presentation almost always pay for it later. Owners who treat it as an exercise in pre-emptive disclosure almost always close at or near the agreed price.

The difference a good broker makes

Through diligence, the advisor's role is partly negotiation, partly project management, and partly to be the buffer between buyer and seller. The seller cannot become defensive on a Friday afternoon call with the buyer's lead partner — but they can complain to their advisor, who can then route the same point back to the buyer dispassionately on Monday morning.

A well-run process keeps a 48-hour rolling query log, runs weekly diligence calls with both teams represented, and ensures the seller is only spending time on the items that genuinely need owner input — not on routine document chases that the advisor and the accountants can handle. The advisor also keeps the regulatory transfer track running in parallel, so that the eight weeks of legal SPA negotiation are not extended to sixteen by a CQC application no-one started until completion was in sight.

Most importantly, the advisor protects the price. Buyers know that diligence is the pressure point in the process where retrades happen. Sellers without an advisor frequently agree to retrades they didn't need to agree to. Sellers with an experienced advisor go into the conversation knowing what is genuinely worth conceding on, what is worth pushing back on, and what the buyer's alternative actually looks like.

Related: Five things that will kill your business sale before you even go to market.  (/insights/five-things-that-will-kill-your-business-sale)

In heads, or about to be?

A confidential conversation about the diligence stage — what to expect, where the pressure points are, and how to protect the agreed price — is worth having before the eight-week clock starts.

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SOURCES

[1] AIG, Marsh and Liberty Mutual mid-market W&I market commentary 2024–2025: shift to buyer-paid premium and downward extension of the economic threshold for W&I coverage.

[2] CQC, Ofsted, BAFE, NSI, SSAIB and UKAS scheme documents and registered-provider transfer guidance.

James Dixey Limited — Specialist M&A for regulated, owner-managed businesses in Care, Education, Fire & Security and Other Regulated Services