Due diligence: what a buyer actually examines
The documents, numbers and contracts a serious buyer reviews before signing, and how owners of Swiss firms can prepare for each of them.
7 min
What due diligence is for
Due diligence is not an audit. A buyer is not trying to certify the accounts; they are testing whether the business they were shown is the business they will own, and whether anything in it changes the price, the structure or their willingness to proceed at all.
In transactions of CHF 500,000 to 3 million, the exercise is usually proportionate: a few focused weeks, a fiduciary reviewing the numbers, a lawyer reviewing the contracts, and the buyer themselves spending time with the owner.
The financial review
Expect three closed financial years plus a current interim position, reconciled to the tax returns. The buyer's adviser will normalise the result: owner compensation adjusted to market, private costs removed, one-off items isolated, and rent to an owner-held property restated at arm's length.
They will also test the quality of revenue — recurring mandates versus one-off projects, average client tenure, pricing history — and working capital, because the level of debtors, work in progress and creditors decides how much cash the buyer must inject on day one.
Clients, staff and dependency
Client concentration is examined closely: revenue by client for three years, contract terms, notice periods, and whether the relationship sits with the firm or with the departing owner. A single client above roughly a fifth of turnover will attract questions and often a structural answer, such as an earn-out.
On the staff side, buyers review employment contracts, salary history, holiday and overtime balances, non-compete clauses and the pension arrangement. Occupational pension obligations, and any deficits or special arrangements within them, belong on the table early rather than late.
Legal, tax and the quiet risks
The legal review covers the shareholder register and share certificates, the articles and any shareholder agreement, leases, supplier and licence agreements, insurance, IT and data protection, plus any pending or threatened dispute.
On tax, buyers look for open assessments, VAT treatment, hidden reserves and — where shares are being bought — the transaction's own tax profile for both sides. Swiss private capital gains treatment for a selling individual can be lost through indirect partial liquidation or transposition, which is why the structure is usually settled with tax advice before, not after, the letter of intent.
How to prepare as an owner
Assemble the file before you need it: accounts, tax returns, client and supplier contracts, employment contracts, the lease, insurance policies, the shareholder register, and a short written note on anything unusual. Disclosing a problem yourself costs far less than a buyer finding it.
Work through a permissioned data room rather than email, so every document is released deliberately and you can see what has been opened. Confidentiality holds only as long as the process is disciplined.
General information for orientation only. It is not tax, legal or financial advice; obtain qualified Swiss advice for your situation.