Due diligence: what is checked before buying

Buying a company without checking it is like signing a contract without reading it. Due diligence is the phase in which the buyer verifies, documents in hand, that the business really is what it seems — and that the agreed price holds up to the test of the facts. It is a technical exercise, often underestimated, that decides whether the deal goes ahead, changes price or falls through.

What it is really for

Due diligence has three concrete objectives:

Confirm the value: do the figures presented match reality?
Uncover the risks: are there hidden liabilities, disputes, future obligations?
Prepare the contract: many findings become warranties and clauses in the sale and purchase agreement.

It is not an exam meant to fail the company, but a way to buy with awareness. Those who skip this phase often pay the bill after the deed, when the problems emerge and there is no longer any room to renegotiate.

Accounting and financial due diligence

This is the heart of the analysis. What is checked:

The financial statements of recent years and their consistency.
The quality of revenues: recurring or one-off, concentrated on a few clients or diversified.
Real profitability, stripped of extraordinary items.
The financial position: debts, bank lines, guarantees granted.
Working capital and its normalisation.

The goal is to understand whether the EBITDA on which the price was built is sustainable or inflated by one-off items.

Tax due diligence

In Switzerland, you check the position with respect to cantonal and federal taxes, the correct handling of VAT (standard rate 8.1% from 2024, registration threshold at CHF 100,000 of turnover) and any exposure to adjustments. You verify that there are no pending assessments or latent risks on tax years still open. An undisclosed tax debt can fall back onto the buyer: for this reason, cover is sought in the contractual warranties.

Legal due diligence

The legal pillars of the business are reviewed:

Articles of association, the share or shareholders’ register, the minutes of the corporate bodies.
Registration in the commercial register and signatory powers.
Relevant contracts: clients, suppliers, leases, licences.
The presence of change of control clauses, which allow a counterparty to withdraw in the event of a change of ownership.
Ongoing or threatened disputes.
Intellectual property: trademarks, patents, software.

Change of control clauses are often the most unwelcome surprise: a strategic contract that dissolves precisely when the company changes hands can erode much of the value.

Personnel due diligence

Human capital is part of the value. Employment contracts, remuneration, obligations towards social insurance (BVG (occupational pension), AHV/IV/EO (state pension/disability/loss-of-earnings), UVG (accident insurance)), any pension commitments, non-compete clauses of key staff and the risk that decisive people leave after the acquisition are all examined. In many businesses the real asset walks out the door every evening.

Operational and environmental aspects

Depending on the sector, you look at dependence on critical suppliers, the condition of machinery and buildings, the authorisations required for the activity, and environmental and compliance issues. In some segments, regulatory and anti-money-laundering aspects also call for a dedicated check.

How the process is organised

In practice, due diligence follows an orderly sequence of steps:

A confidentiality agreement before sharing sensitive data.
A data room: a space, today almost always digital, where the seller uploads the documents.
Request lists and question-and-answer sessions.
A report that gathers the findings, distinguishes serious problems from minor ones and quantifies the risks.

The outcomes translate into concrete levers: a price adjustment, warranties and indemnities, conditions precedent, or part of the price held back as security.

In summary

Due diligence verifies accounts, tax, contracts, staff and risks before the purchase.
It serves to confirm the value, uncover hidden liabilities and lock down the contract.
The findings become price, warranties and clauses.
Skipping it is the saving that costs the most.

How we help you

We guide buyers and sellers in extraordinary transactions: we set up the data room, coordinate the checks and translate the results into a contract that protects those we represent. Let’s talk about your deal.