How to Survive Due Diligence (and Protect Your Deal Valuation)
Updated: Sep 8
15th July 2026
When a buyer makes an offer to acquire your IFA/wealth management firm, they have a high-level picture of your business based on the data they have been granted access to up until that point. Due diligence is the deep dive an acquirer will undertake to check that everything you have presented to them stacks up and they understand the business (and its history) fully.
Due diligence can be a daunting process. It can also be an emotional one. The process is a systematic review of all areas of your business and it can create defensive feelings in sellers. As a proud firm owner, it can sometimes feel like an attack on you, or like the buyer is dismissing the merits of the business and only focusing on potential issues. However, that is usually not the case. A credible buyer is looking to understand the business correctly, not to find fault for the sake of it. Ultimately, they need to decide if there are any risks that would impede a transaction closing.
There will always be buyers who try to chip the deal price or retrade on the terms of a deal, but a well-qualified buyer selection process will help weed out these types of acquirers. The other way to protect the deal is to make sure the buyer has the right data before terms are agreed, so the offer is based on accurate information, and there is less room for it to change during due diligence.
The following article will break down due diligence in its entirety, including what it entails for financial planning business owners, how it differs in share sales versus asset sales, how long it takes, how much it costs, and the common seller mistakes to avoid.
Table of contents
What is due diligence and how does it work in an IFA sale?
Due diligence typically begins after Heads of Terms have been agreed and signed, and you are in exclusivity with one buyer. This is typically one to three months into the wider IFA sale process, depending on how long the initial data gathering, meetings and negotiations last.
The buyer will send a due diligence request list, setting out all of the information required across all the segments of the business. They will want to understand the service and advice history, the legal history, the financial history and the overarching operational history of the company.
It is standard practice to create a single secure location to store and provide access to this data - this is known as a data room. If a buyer sets the data room up it will almost always be deleted if the deal doesn’t go ahead, whereas if the seller sets it up, they of course retain access to it. This can come in handy should you need to move to another acquirer; the data might need refreshing, but it saves the complete duplication of workload. If the seller sets it up, they also have full control of who has permission to access the data, enabling much more robust tracking of who has seen what information and when.
The process is usually led by several parties:
The seller provides accurate information and answers questions on how the business has been run.
The seller’s solicitor deals with the legal documentation, disclosure process, warranties and indemnities.
The accountant may support on financial questions, including recurring income, EBITDA, management accounts and tax.
A compliance consultant may be involved where file reviews, complaints, DB transfers or regulatory records need closer attention.
At this point, your intermediary will usually take more of a backseat role as your professional advisers for each workstream assist you in navigating the process, but will remain on hand to answer any questions and keep the process ticking along.
If something sounds off, you notice a mistake, or parts of the deal begin to shift, it is always worth flagging it. Your intermediary should then step back in and help get the transaction back on track.
How much does due diligence cost?
The cost of the process varies significantly based on the deal structure (share sale vs asset sale), the complexity of the transaction, and the size of the deal. It will also depend on your advisers and what they charge – some will be more expensive than others.
Both sides tend to pick up their own bill. The buyer will normally pay for their own legal, financial and compliance review, but sellers should expect their own professional costs, including legal advice, accountancy and tax advice, compliance support, data preparation and, in some cases, PI insurance or run-off cover advice.
We’ve also seen instances where certain buyers will offer to cover a percentage of the seller’s costs if the process is done within a certain time, or they will contribute to the seller’s legal fees if the seller chooses from a panel of solicitors known to the buyer. At first glance, this might spook some sellers, but the rationale is sound – the solicitors are specialists in our space and they know how to get the best deal for their client (the seller).
Legal fees are usually one of the main costs that a seller will incur. A solicitor will review Heads of Terms, advise on the Asset Purchase Agreement (APA) or Share Purchase Agreement (SPA), negotiate warranties and indemnities, and help prepare the disclosure letter. Costs are usually higher in a share sale, because the buyer is acquiring the company and its historic liabilities and therefore due diligence is more extensive. The documentation on an SPA can be a hundred pages or more, while an APA might be ten to fifteen pages.
It is also worth noting that we see legal fees increase significantly when a firm instructs a local solicitor instead of one that specialises in this space. This is because the solicitor is having to learn on the job, which slows the transaction down and makes it more expensive. In some instances, we have also seen this cause deals to fall over altogether.
The other cost is time. Preparing documents, checking client data, reconciling financial information and answering follow-up questions can put pressure on a small advice firm.
What are the stages of due diligence?
Disclaimer: the lists of documents and information included in the sections below are intended as a guide only. Sellers should not treat these lists as exhaustive.
Often due diligence will be broken down into sections or stages to categorise the different types of information buyers will ask for.
Compliance
Financial
Legal
Operational and IT
Compliance due diligence
Compliance due diligence in an IFA sale is typically the first stage, as it is where most of the serious issues that could cause a deal to fall over come to light. Serious issues such as persistent complaints, a poorly managed DB transfer book or advice quality concerns found at this stage can be detrimental to your deal.
A buyer will usually start by reviewing your regulatory standing and compliance history. It is worth checking these records in advance to ensure everything is up to date and accurate.
DB transfer exposure can attract particular attention. Material exposure does not necessarily prevent a deal, but it can sometimes affect the structure, for example, you may be less likely to be offered a share purchase. At the time of writing, having defined benefit transfers on your books isn’t as big a risk as it was several years ago, but it is important to have a clear and complete register of cases and the files and documentation to go with them.
The ability to evidence the historic delivery of your annual reviews with clients has become a big focus for buyers in recent years. Following the FCA's work on ongoing advice, buyers now sample whether reviews were actually delivered against the fees charged, not simply whether a review process exists on paper. Failure to evidence this can lead to issues with the deal and in extreme cases would stop a deal going ahead.
Buyers will usually review:
Regulatory Standing
FCA Register and Directory entries – FRN, permissions, regulated status, adviser roles and Directory Persons data
FCA supervisory history – Section 166, past business reviews, VREQs
People
Adviser qualifications and current annual SPS certificates
SM&CR documentation, including Statements of Responsibilities, certification records and fit and proper assessments
T&C scheme records – supervision logs, CPD, file check outcomes
Complaints and Insurance
Complaints, FOS involvement, redress paid, remediation work and breach records
PI Insurance – claims history, excesses, exclusions, and run-off terms
Advice
High-risk business – DBT activity, VCT, EIS, UCIS
Fact finds, attitude to risk, capacity for loss, research, illustrations and suitability reports
Investment proposition documentation – CIP, platform selection, DFM
Disclosure documentation, terms of business and cost disclosure documents
Annual review evidence – ensuring service delivery versus fees charged
Systems and Controls
Compliance monitoring records
Consumer Duty monitoring – fair value assessment, annual board report
AML policy, controls and checks
Conflicts of interest and best execution policies
Introducer register and agreements
Financial due diligence
Financial due diligence is where buyers test whether the business performs as presented. It has the most direct bearing on how your IFA business is valued because it shows how predictable, recurring and transferable the income actually is.
The buyer is also assessing the quality of the earnings. They will want to understand how sustainable the income is, how much of it is recurring, and how likely it is to grow. Is the business made up solely of recurring income with no new clients, or is it all transactional and therefore less predictable? Both have their pros and cons. A company with no new clients coming in relies heavily on market movements and client top-ups. On the flip side, if the income is all transactional, what happens when this slows?
Buyers will also look closely at the client base, and assess any risks there. For example, is there a concentration risk from a small number of large clients who would create an issue for the firm if they left? Is there a large proportion of older clients, with limited intergenerational planning? These factors can present a risk to the longevity of the business, compared with a firm that has clients across different age ranges and clear work already done to engage with the next generation.
Buyers will usually review:
Full statutory accounts with detailed P&L – it will typically be three years, but can vary as the buyer might want accounts for periods further back
Management accounts for the current financial period – statutory accounts will typically be out of date, so a clear real-time picture of monthly revenue and costs is essential
Historic RMAR returns – buyers will ensure these are consistent with accounts, management accounts, and other relevant data. They will typically be requested for the same duration as other historic financial information
Income, costs and cashflow – understanding the frequency of payment from clients, platforms and providers. Do you have cash hitting the bank — daily, weekly, monthly, quarterly etc. and from whom?
Recurring and one-off income – what is the make-up of your revenue in terms of business type and is it recurring or transactional.
EBITDA and normalised adjustments – the detailed schedule of any add-backs or adjustments required
Discretionary or owner-specific costs – this can include costs in the business related to the shareholders that might not truly reflect the actual running costs for a market rate replacement. PMI, pension, vehicles etc.
Client data – AUM, client ages, locations, fees paid
Revenue concentration – dependency on a small number of large client households
AUM movement over the last five years – inflows from clients, AUM lost to client withdrawals, bereavements, and clients leaving. Separating out market movements can be required to get a clear picture of actual net flows.
Platform and provider breakdown – where assets sit and the terms associated with each provider and platform
DFM exposure – assets with DFM, costs and what sort of agreements are in place
Salary and bonus arrangements – details of the compensation package and how advisers are paid
Households managed by each adviser – a clear understanding of how many clients each adviser services, under or over resourcing
Revenue and FUM by adviser – how much AUM and revenue each adviser is responsible for, and whether there is any concentration risk
Employed and self-employed adviser arrangements – are there strong contracts in place, are there self-employed advisers who own their clients?
Paraplanner to adviser ratio – how many technical support staff are in the business and what are they paid, how does this impact the P&L?
Legal due diligence
Legal due diligence is where the buyer reviews the ownership, contracts, liabilities and legal structure of the business – anything that could affect the completion, warranties, indemnities, deal structure or the integration of the business once the deal is complete. The scope of legal due diligence varies depending on whether the transaction is structured as a share purchase or an asset purchase. In either case, your solicitor will play a central role, so it is important to engage someone familiar with IFA transactions.
Delays and extra legal costs can arise when company matters have not been properly documented, or carried out correctly. This might include shares that have been sold or gifted without the right paperwork, property leases or ownership being more complicated than expected, or filings with Companies House being poorly maintained.
The contracts with your advisers and staff will be under serious scrutiny through this process and, if they are not properly in place, will need to be remedied prior to any sale. Contracts with suppliers, leases, PI insurance and data protection will also come under review. Buyers will want to see that key agreements are properly documented, client data is accurate and securely held, and privacy notices are up to date. If your privacy notice does not already explain that client data may be shared with a third party in the event of a business sale, this should be addressed before going to market.
Buyers will usually review:
Companies House filings – accounts, confirmation statements, missed filings, charges or debt over the firm
Ownership structure and shareholder information – share classes, shareholder agreements, option or equity schemes
Business history, including prior transactions, MBOs or ownership changes with the proper documentation to evidence them
Litigation history – anything current, settled, and even threatened
Client terms of business – signed and up-to-date TOB with the clients
Third-party agreements with platforms, providers, introducers and outsourced partners such as IT, compliance, technology and subscriptions - including commercial terms, termination rights, exclusivity and rights to assign
Commercial property leases – the terms, break clause, consent to assign the lease required
Employment contracts and notice periods – compensation packages, restrictive covenants
Self-employed adviser agreements – client ownership, any covenants, how a separation is handled
Data protection policies – ICO registration, data breach logs
Client data accuracy and storage – where do you host the data, who has access to it?
Privacy notices – permission to disclose data to a third party in the event of a sale
Operational and IT due diligence
Buyers need to understand how your firm runs day-to-day and who is involved in making this happen. Often, owners will wear multiple hats, which is fine, but this will need to be considered when the new owner takes over. The buyer’s team will have to take on those respective roles and integrate the business into their own systems and processes.
Firms using well-established systems may find this stage easier than those on legacy or bespoke systems. An experienced and credible buyer will be able to assist in migrations and integrations to their systems if you are on a back-office system.
However, a sole adviser with a lean support team doesn’t necessarily need a back-office system. We see plenty of quality, single-adviser firms that have a central data storage system and a process that enables the different members of their team to carry out their roles. The key thing is that the buyer understands how the business operates day to day.
The same applies to cyber security and data protection. Buyers will want to understand your processes and systems that are in place to protect the firm and its client data.
Having a clear process around what tech you use and why is important. The clearer and more concise this can be, the better.
Buyers will usually review:
Data quality – how clean is it, how comprehensive is it, how easy will it be to move?
Back-office system – what do you use, how do you use it?
CRM
Risk profiler
Research tool
Cashflow planning software
Portfolio accounting
Suitability report tools
Protection quote tools
Money laundering check tools
Differences in due diligence for an asset sale versus for a share sale
When you sell your business, the offer you receive from a prospective buyer will be structured as either an asset purchase agreement (APA) or a share purchase agreement (SPA). The structure of your transaction will impact the scope of due diligence required for your deal and the length of time it will take.
In a share purchase, the buyer is acquiring the company as a legal entity and therefore takes on its entire history, including any liabilities. In an asset purchase, the buyer is only acquiring specific assets, typically the client book and goodwill, meaning the company’s liabilities remain with the seller. As a result, share purchases typically require more extensive due diligence than asset purchases. The buyer needs to understand the full picture of what they are taking on: the firm's regulatory history, historic advice risk, complaints record, litigation, contracts and financial performance. The structure also has different tax implications for the seller, including whether and when Business Asset Disposal Relief (BADR) may apply.
As Daniel Bisby put it in our webinar on exit readiness, the level of due diligence required in a transaction is centred around risk: “an SPA or APA is about the allocation of risk between the buyer and the seller.”
FCA Change in Control approval is also required for a share purchase, which adds a further layer of documentation and time to the process.
How long does due diligence take?
At Chapters Capital, where a seller is engaged and data is well prepared, we would expect to see due diligence for an asset sale take one to two months and a share purchase take approximately three to four months.
The information requests during due diligence are comprehensive, and can take a lot of time, but they tend to be done in phases so you can prioritise different segments and keep things efficient. Most firms will only have one or two people with access to all of the data required, so deciding when to involve other people in the business is a case-by-case decision. Some owners tell their staff before the process starts, while others wait until much closer to completion. Either way, the duration of due diligence is heavily affected by how quickly the information can be provided, and how complete it is when submitted.
Once the buyer has the information, they will need to review it. The speed of this can be influenced by a number of factors – how much information there is to review, whether it is complete when submitted, whether they are doing the review internally or using an external adviser, and how many other deals they are doing at one time.
It can also come down to more mundane things, such as the time of year – annual leave during summer can slow things down.
For the typical timeframes for due diligence alongside the other stages of a transaction, see our guide to how long it takes to sell a financial planning firm.
What DD mistakes can make a deal change or fall over
The main reason a deal might change or fall over during due diligence is that the buyer finds information that was not disclosed, or that does not match what was presented before terms were agreed. Of all the things that can derail a deal during due diligence, lack of disclosure is a damaging trap for sellers to fall into, but regulatory surprises during DD are most likely to make a deal fall over outright.
If the business is presented accurately before exclusivity, then there shouldn’t be any wiggle room for a buyer to retrade on the terms agreed. However, where a seller has not disclosed something, or the information provided was inaccurate, the deal is likely to shift from what was originally agreed.
This can lead to the seller thinking the buyer has chipped the deal, but in most cases they are just responding to the new information. There will always be outliers and buyers who try to use due diligence to reduce the price, but in most cases, it is new information that impacts the terms or conditions of a deal.
Preparing your IFA business properly before going to market and making complete, honest disclosures before entering negotiations with a buyer are the most effective ways to protect your deal and consideration.
Considering your next chapter?
At Chapters Capital, we specialise in financial planning and wealth management M&A.
If you own an IFA, financial planning or wealth management firm, we can help you understand the options available to you, from pre-sale planning and selling your firm to retire, through to sell and stay structures and partnership programmes.
For a confidential conversation about valuation, buyer fit or your route to market, contact our team.
📞 +44 (0)204 519 7811 | ✉️ info@chapterscapital.co.uk
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