Due diligence is the formal process by which a buyer (and their advisors) verifies all material information about a business before completing the purchase. It is the buyer's opportunity to confirm that everything the seller represented is accurate and to identify any issues that could affect the value or viability of the acquisition.
The Three Pillars of Due Diligence
Business due diligence typically covers three areas simultaneously. Financial due diligence verifies revenue, expenses, cash flow, and the accuracy of the SDE recast through review of tax returns, bank statements, payroll records, and financial statements. Legal due diligence reviews contracts, licenses, permits, litigation history, and compliance status through document review by a business attorney. Operational due diligence assesses the business's systems, staff, customer relationships, technology, and facilities through direct observation and management interviews.
Due Diligence Timeline
Standard due diligence periods in Illinois small business acquisitions range from 30 to 60 days, though complex transactions (healthcare practices, regulated industries, real estate-intensive businesses) may require 90+ days. The clock starts when the LOI is signed and the seller provides access to the due diligence document package.
Sellers should prepare for due diligence before going to market, not after receiving an offer. Organized, complete documentation that is ready to share immediately when a buyer requests it demonstrates professionalism, accelerates the process, and reduces the risk that due diligence findings will derail a deal that should close.