Vendor Due Diligence — What a Buyer's Team Will Find Before You Do

Vendor Due Diligence — What a Buyer's Team Will Find Before You Do

By the time a buyer's due diligence team is reviewing your business, the questions have already been written. Most owners discover this too late — when a finding cuts the offer by 15%, or stalls the deal three weeks before settlement. Vendor due diligence is the response to that asymmetry. It is the same investigation a buyer would commission, run on the seller's behalf 12 to 24 months ahead of a transaction. Done well, it surfaces the questions before a buyer can use them as leverage — and it has become one of the highest-return pre-sale exercises an Australian SME owner can undertake. Three areas consistently surface in DD that owners have stopped noticing.

1. Rebuilding the real earnings

A buyer's team rebuilds your EBITDA from the underlying ledger, not the management accounts. They test owner drawings, related-party transactions, year-end timing of revenue, addbacks claimed but undocumented, and the working-capital baseline assumed in your asking price. Each is a renegotiation lever.

Vendor DD runs the exercise first. Weak addbacks are removed before the buyer ever sees them. An incorrect working-capital position is corrected. A defensible normalised EBITDA, with a clean working-paper file behind it, removes the largest single source of post-LOI price reduction.

2. Testing the dependencies a buyer will weight against you

DD asks what happens if the owner walks out, the top three customers leave, the key supplier renegotiates, or the senior operator resigns. Each is modelled and discounted. Owner reliance, customer concentration, undocumented processes and informal supplier arrangements are not 'risks' to a buyer — they are quantified deductions.

Vendor DD identifies the dependencies, frames the impact in the buyer's language, and gives the owner a window to fix what can still be fixed.

3. Reading the data against the narrative

The most common DD finding is not fraud. It is a mismatch — between the operational data, the statutory financials, and the strategic story being told. When the three stop reconciling, a careful buyer assumes the least favourable interpretation.

Vendor DD reconciles them before that happens. It is the same investigative work Richmount does on the buy side — applied on the seller's side, at the seller's pace.

If you are planning to sell within the next 18 to 24 months, vendor due diligence is the work that protects what you are about to monetise.