Investors check the cash, the revenue and the records behind them. We get the books, filings, cap table and forecast ready before they ask.
The documents go into a data room, a secure online folder the investor's advisers work through. Each document that has to be rebuilt during the round adds time to it.
Source: ICAEW Corporate Finance Faculty, Financial Due Diligence, Guideline 71 (2024).
The British Business Bank publishes a due diligence checklist. It is written for buying a business, and the bank says it also applies to buying shares in or investing in a company. Its financial strand covers:
Its legal strand covers contracts, insurance, licences, regulatory compliance and litigation, and it also covers operations, assets and intellectual property, employees and marketing.
A data room usually has these sections (UK Space Agency checklist on GOV.UK):
Reconcile to a recent month end, so every figure an investor sees agrees with the bank.
Accounts, confirmation statements, corporation tax, VAT and PAYE filed and paid, with anything late dealt with first.
Every share issue, transfer and option grant agreeing with the register of members and Companies House.
Monthly cash and profit with the burn and runway shown, and each assumption written down.
Name each document clearly and keep it current while the round runs.
A central, secure place for all the company's documents, legal, financial, commercial and regulatory, that investors review before investing (UK Space Agency data room checklist).
No. The ICAEW's guideline says financial due diligence is not an audit and gives no assurance opinion.
Usually the cash: the current cost base and how fast the company is spending, which shows how long the money will last. Revenue growth, how revenue is recognised and how costs are split come next.
Yes. For smaller investments the ICAEW notes more emphasis on legal and tax checks, such as how share schemes are set up. Investors in an SEIS or EIS round will also want to see advance assurance.
It depends on how current the books and records are, so we quote after a first look. The Business Pulse set-up, which builds a budget and 12-month cash flow forecast, is from £750 + VAT.
