When you think of private equity deals, you might picture buyers going through piles of documents, combing through every detail to find potential issues. But sellers have just as much to gain from doing their own due diligence—maybe even more. As a seller, this is your chance to spot problems early, fix them before they become deal-breakers, and make sure your business looks its best. By putting in the effort upfront, you stay in control and secure the value you deserve.
At Threadneedle Law, we help sellers navigate this crucial process. Since we’ve worked with both buyers and sellers in private equity transactions, we know exactly what buyers look for, what makes them nervous, and what might make them reduce their offer. Our approach is all about anticipating those buyer concerns and addressing them before they become an issue.
This blog is part of our series on maximising value in private equity deals, and here we focus on why seller-side due diligence is key to protecting your business’s value and making sure your exit is smooth.
Why Seller-Side Due Diligence is Essential in Private Equity Transactions
In private equity deals, buyers will always do their own due diligence. But if they find problems before you do, the power shifts to them. They might lower their offer, add more restrictive terms, or worst of all, walk away entirely. On the other hand, if you’ve already done your homework through seller-side due diligence, you’re in control. You can fix issues in advance, present a well-prepared business, and head into negotiations with confidence.
Take, for example, a well-known consumer brand getting ready for a sale. During an intellectual property (IP) review, we found out they hadn’t secured the copyright for their distinctive packaging. Just before the sale, the designer and one of the founders tried to demand a substantial sum to transfer the copyright they claimed to own, rather than the company. Thanks to early intervention, the company resolved the issue before it escalated further. Although the sale was delayed due to litigation, the company avoided significant reputational damage—which would have been much worse if the issue had come out during the sale process.
At Threadneedle Law, our experience representing buyers in private equity deals gives us a big advantage. We know what buyers want—because we’ve been on that side too. This insider knowledge lets us anticipate potential problems and help sellers prepare so they’re always one step ahead.
Common Pitfalls in Seller-Side Due Diligence
Sellers often run into certain pitfalls during due diligence, which can lead to delays or lower offers. Here are the most common areas where issues arise and why they matter:
- Intellectual Property (IP) Ownership: IP issues often get overlooked until it’s too late, especially in sectors like technology and consumer goods. Sellers might think they own all their IP rights, but a closer look can reveal gaps. Making sure all IP is properly secured and documented before negotiations is crucial. Otherwise, buyers might see this as a major risk and lower their offer to compensate.
- Employment Liabilities: Buyers care about your team—especially if key employees are staying on after the sale. If there are unresolved disputes, unclear employment contracts, or misaligned incentives, these can all raise red flags. Sorting out these contracts before negotiations helps you present a unified, attractive proposition. The last thing you want is for a disgruntled former employee to create issues during the process.
- Financial Records: Inconsistent or incomplete financial records are a huge red flag for buyers. They will scrutinise every detail, especially private equity managers or institutional investors. If your numbers don’t add up, they’ll start doubting everything else. By keeping your financials clean and ready for review, you show that your business is stable and trustworthy.
- Tax Compliance: Tax issues have a sneaky way of causing chaos at the last minute. Whether it’s unresolved VAT payments or cross-border tax problems, tax liabilities can derail a deal. Keeping your business up to date with all tax obligations isn’t just about ticking boxes—it’s crucial for keeping buyers confident and engaged.
At Threadneedle Law, our seller-side due diligence process is designed to catch these issues before they become deal-breakers. We take the same thorough approach we use for buyer-side transactions, making sure you enter negotiations with the full picture and no surprises.
How Threadneedle Law’s Buyer-Side Experience Benefits Sellers
One of the biggest advantages of working with Threadneedle Law is that we’ve seen it all from the buyer’s perspective. We’ve advised private equity funds, private equity managers, and institutional investors on countless acquisitions. We know exactly what they’re looking for when evaluating a business. And when we represent sellers, we use that knowledge to anticipate what buyers might flag—and deal with it before they even get the chance.
Take the case of one of our clients, a business owner negotiating with a tough private equity firm. During our due diligence process, we discovered significant issues with supplier contracts—specifically, poorly negotiated terms that put the company at risk of substantial costs post-sale. These contracts lacked key protections, like termination rights and pricing adjustments, which could have cost the company millions. By stepping in early, we helped the seller renegotiate these contracts, securing better terms and ensuring that the value of the deal was preserved. Although the process was challenging, this proactive approach helped mitigate the risk and ultimately supported a smoother exit.
At Threadneedle Law, we believe that knowledge is power. By understanding what buyers want and expect, we help sellers stay ahead of the game.
Post-Closing Considerations: More Than Just Signing the Deal
For many sellers, the deal doesn’t end once the ink is dry. Often, sellers stay involved in the business after the sale, whether as employees, minority shareholders, or part of the management team. This is where investment agreements, management incentive programmes, earn-out provisions, and employment contracts become especially important. If these aren’t drafted properly, you could end up with unfavourable conditions that limit your future options—or worse, impact the remaining value you’ve negotiated for.
At Threadneedle Law, we specialise in drafting post-sale provisions that protect individual sellers. We make sure your rights and interests are safeguarded and help facilitate a smooth transition so you can move forward with confidence. The last thing you need is to be stuck with complicated post-sale arrangements that don’t work in your favour.
Maximise Value with Seller-Side Due Diligence
Due diligence isn’t just the buyer’s responsibility. When sellers conduct rigorous seller-side due diligence, they stay in control, fix any potential issues ahead of time, and enter negotiations from a position of strength. At Threadneedle Law, our experience working with both buyers and sellers in private equity deals gives us a unique edge. We know what buyers are looking for, and we make sure sellers are ready.
So, if you’re ready to sell your business and want to get the best possible value, reach out to Threadneedle Law. We’ll help you get exit-ready and protect the value you’ve worked so hard to build.
