In a competitive deals market where buyers are moving quickly and investor expectations continue to rise, businesses preparing for an exit or investment are increasingly turning to vendor due diligence (VDD) to stay ahead and maximise value.
Once viewed as something reserved for large corporate transactions, VDD has rapidly become a mainstream tool for low-to-mid-market businesses looking to optimise outcomes and reduce uncertainty during a transaction.
Control the process and remain a step ahead
At its core, VDD is about putting sellers in the driving seat. Instead of waiting for a buyer to uncover issues late in the process, often leading to price reductions, delayed completion or higher abort rates, VDD gives management the opportunity to understand their own business through a potential investor’s lens before going to market. This enables potential issues to be identified and addressed early, either through remedies or mitigating measures, and allows sellers to present a clear, credible and high-quality financial story from day one. The fundamental aim of VDD is to enable sellers to anticipate issues, resolve them and control the narrative, driving the transaction towards a successful outcome.
One of the biggest advantages of VDD is its impact on deal pace and certainty. Many transactions stall because information is incomplete, inconsistent or difficult for buyers to interpret, which often leads to the erosion of trust or an undermining of confidence in the management team and finance function. A robust VDD report streamlines this entirely, providing buyers with the confidence that financial performance, working capital, cash generation and key assumptions have already been independently reviewed. This significantly reduces the time spent in confirmatory diligence, sometimes involving multiple bidders with separate buy-side DD teams, and often results in faster timelines and fewer last-minute surprises.
VDD has a clear practical benefit for the seller, in particular the seller’s finance team: VDD means they only go through the diligence process once, and on their own terms. Instead of responding to multiple sets of buyer‑driven information requests across several phases, often repeated for every interested bidder, VDD centralises the financial and tax due diligence findings into a single, comprehensive report that can be shared with all parties. This minimises disruption, reduces duplicated work, and allows management to remain focused on running the business during a lengthy and onerous transaction process.
A stronger negotiating position
We are seeing VDD reshape negotiation dynamics. In processes without VDD, buyers typically use their own due diligence findings, derived late on in the transaction process, to challenge a seller’s numbers – sometimes justified, sometimes not. With VDD in place, discussions become more balanced, not least because of the VDD adviser’s role necessitating a higher degree of objectivity. Sellers can engage on complex areas, such as EBITDA adjustments or normalised working capital, with clear analysis underpinning the figures and a position that has already been stress tested by way of a due diligence exercise. For many, this leads to stronger valuations and greater protection against unnecessary price chips.
Another reason VDD is gaining traction is the increase in private equity interest in the region. PE investors are accustomed to receiving high-quality information packs and expect clarity around drivers of profitability, sustainability of earnings and future growth potential. Businesses that provide this upfront tend to attract more interest and are better positioned to secure competitive tension in a sale process. VDD enables the seller to keep multiple potential interested parties engaged for longer and therefore increase the competitive tension.
While VDD requires early commitment, the benefits are clear. It reduces disruption during the deal, gives management greater confidence, and ultimately helps businesses tell a more compelling value story. In a market where quality information is a differentiator, VDD is becoming an essential step for ambitious companies preparing for the next stage in their journey.
How can UNW help?
UNW’s Deal Advisory team has a dedicated transaction services capability focused on both buy-side and sell-side due diligence, including vendor due diligence for businesses preparing for exit or investment. We combine technical expertise with hands-on deal experience, helping shareholders and management teams anticipate buyer scrutiny, address issues early and present a clear and well-evidenced financial narrative.
We help our clients improve deal readiness, reduce disruption and support smoother, more successful outcomes.
If you would like more information about the topics discussed in this article, or any other due diligence related matters, please get in touch with dannymalone@unw.co.uk.