Preparing for your first funding round or selling your business is a big step. Getting it right can make all the difference. Proper preparation puts you in the best position of negotiating a great deal and completing a successful transaction.
This article is for founders and senior decision-makers, like CFOs, who are gearing up for the critical milestones involved such as due diligence and the disclosure of key business information to third parties. This process can feel overwhelming, but managing and sharing the right information effectively is key to avoiding delays, minimising risks, and maximising value.
Whether you’re seeking investment or negotiating a sale, we’ll break down what’s expected, why legal expertise is essential, and how being organised and transparent can help you achieve your goals.
Contents:
Why proper document disclosure is critical
How disorganised or incomplete document sharing can undermine a transaction
Disorganised or incomplete document sharing can seriously derail a funding round or sale.
Buyers and investors expect clear, reliable information to evaluate your business. If key documents are missing, outdated, or messy, it sends up red flags, creates delays, and could even cost you the deal. Worse, it might lead to renegotiated terms or legal headaches later.
On the flip side, having everything ready and well-organised shows you’re in control and builds trust. Proper disclosure isn’t just about ticking boxes, it’s about giving your business the best chance to impress and ensuring the process runs smoothly.
Disorganised or incomplete document sharing can seriously derail a funding round or sale.
When it comes to securing funding or selling your business, first impressions are everything.
If your business comes across as professional, well-prepared, and trustworthy, investors or buyers are far more likely to get on board. Organised documentation and a transparent approach show you’re confident and have nothing to hide.
On the other hand, a lack of preparation raises doubts, delays the process, and might even scare people off. By presenting your business as investor-ready and prepared for scrutiny, you build confidence, reduce risks, and position yourself as a low-maintenance, high-value opportunity that’s worth investing in.
What buyers and investors look for
Key categories of information for due diligence
During due diligence, investors or buyers want a clear picture of your business, so getting your house in order is crucial. Start with financial records – think profit and loss statements, balance sheets, and tax filings. Next, focus on intellectual property (IP). You need to make sure your patents, trademarks, and copyrights are protected and that that you can demonstrate this. Don’t forget contracts such as supplier agreements, employee contracts, and leases as these will all be under the microscope.
Finally, ensure you’re on top of your regulatory compliance to avoid any nasty surprises. Having these categories well bookmarked and organised keeps the process moving smoothly toward completing the deal.
How getting it right speeds up the process and improves outcomes
Getting your due diligence right from the start can save you lots of time and stress. When everything’s organised and easy to access, you reduce back-and-forth questions and keep investors or buyers focused on your business’s strengths, not its gaps.
It also helps avoid last-minute delays that can derail negotiations or weaken your position. More importantly, being transparent and prepared builds trust, which can lead to better offers and smoother negotiations. Simply put, the more you’re on top of your documentation, the quicker and more successful the whole process is likely to be.
Common pitfalls of DIY approaches
Issues with ad hoc solutions like email chains and unsecured file-sharing platforms
Relying on email chains or unsecured file-sharing platforms for due diligence might seem convenient, but it can create big problems.
Files get lost in endless email threads, multiple versions cause confusion, and sensitive information is exposed to unnecessary risks. Unsecured platforms can leave you vulnerable to data breaches or unauthorised access, damaging trust with investors or buyers.
Worse, the disorganisation slows everything down, causing frustration on both sides. A proper, centralised solution such as a secure virtual data room ensures that all documents are easy to find, safely stored, and professionally presented, setting the right tone for your transaction.
The risks of poor disclosure
Messy or incomplete disclosures can send the wrong message to investors or buyers.
Missing key documents like updated financial records or signed contracts can make your business look disorganised or even untrustworthy. Outdated information wastes time and raises unnecessary questions, while poorly labelled or unstructured files create confusion during review.
These missteps delay negotiations, weaken your bargaining position, and may even jeopardise the deal. Taking the time to get your house in order not only avoids these pitfalls but also reassures the other party that you’re serious and prepared.
Premature disclosure and avoiding exploitation
Sharing sensitive information too early or without proper safeguards can put you at risk of exploitation. Premature disclosure might reveal your business’s vulnerabilities, such as legal disputes, IP weaknesses, or financial pressures, that buyers or investors could use to push for lower valuations or unfavourable terms. You might also end up sharing unnecessary or overly detailed information that could harm you in future negotiations.
To protect yourself, always control what you disclose and when, and use non-disclosure agreements (NDAs) to safeguard sensitive details. Legal expertise is invaluable here, ensuring your interests are protected at every stage.
The value of your solicitor in due diligence
Lawyers know what the other party expects
Lawyers play a crucial role in making sure your due diligence process is smooth, professional, and thorough. They know exactly what information buyers or investors will expect and can help you identify and gather everything needed. They’ll also spot gaps, outdated files, or potential red flags that could delay or derail the process.
Beyond organising, lawyers ensure sensitive information is presented clearly and securely, protecting your business while building trust with the other side. Their expertise not only saves time but also helps you maximise outcomes by putting your best foot forward.
Helping you maintain confidentiality
While transparency is crucial during due diligence, you don’t need to disclose everything. You should withhold certain details such as key clients or customers to protect relationships and prevent competitors from gaining an edge. Similarly, you should only share intricate details of your intellectual property, like source codes or trade secrets, with strict controls and at the right stage of negotiations.
Being selective about what you disclose, while maintaining transparency, protects your business. Always consult legal experts to strike the right balance between sharing enough to build confidence in your team while safeguarding sensitive details.
Always use secure platforms, such as virtual data rooms, designed for due diligence. These provide encryption, access controls, and activity tracking, ensuring only authorised parties view your files. Never use unsecured methods like email or basic file-sharing apps, which can expose you to data breaches or legal risks.
Make sure you’re compliant with regulations like GDPR, particularly if your documents contain personal data. Consulting legal experts ensures your sharing process is both secure and aligned with legal requirements.
Deciding if you need an NDA before sharing information
We highly recommend using an NDA before sharing sensitive information. This binds the recipient to keep your documents confidential, reducing the risk of leaks or misuse. It’s especially critical if you’re sharing proprietary details, like intellectual property, or client data. While NDAs aren’t foolproof, they provide an added layer of protection and demonstrate your professionalism.
Your solicitor can help you decide whether an NDA is necessary, and for which documents. By setting clear boundaries early on, you maintain control over your information and reduce the risk of exploitation during the due diligence process.
Avoiding common oversights
Small oversights during due diligence can have big consequences. Common mistakes include missing or outdated documents, poorly organised files, and inconsistent financial information. Failing to address potential red flags, such as unresolved legal issues or compliance gaps, can also damage trust with investors or buyers.
Another major pitfall is sharing sensitive information too soon or without proper safeguards. Avoid these issues by working closely with legal and financial advisors and taking the time to prepare properly to keep your deal on track.
Help with fundraising or selling your business
Whether you’re raising funds or selling your business, getting your due diligence right is key to sealing the deal. But let’s face it, managing disclosures, digging out documents and presenting them well can feel overwhelming. That’s where we come in. Our team of expert solicitors specialises in helping businesses like yours navigate due diligence with confidence.
We’ll make sure your documents are organised, your disclosures are airtight, and your business is presented in the best possible light. Don’t risk delays or missed opportunities, get expert support to maximise your outcome. Contact us on 0800 689 1800 or fill out the short contact form below and a member of our team will be in contact.
