The request list arrives, and the deal changes shape

Right after the letter of intent is signed, the buyer's advisers send over a request list. On a Belgian mid market deal it usually runs to a few hundred numbered items across five or six workstreams, with a deadline attached. That is the count we see in practice, and it is where the deal stops being a conversation about price and becomes due diligence: verification of everything you have said, by people paid to find what you left out. From that day the number in the letter of intent behaves like a ceiling, not a floor.

We have already published a short overview of why the exercise matters, due diligence as the hidden key to a successful deal. This is the map rather than the summary: the phases in order, who controls what, and where value moves from the seller's side of the table to the buyer's.

Phase one, before the letter of intent: the only phase you fully control

Everything a buyer will ask for in month three already exists somewhere, in some state. Phase one is finding it and fixing what can still be fixed. Statutory accounts reconciled to management reporting. Minutes written up and signed. A share register that matches reality under the Belgian Companies and Associations Code. Intellectual property assigned in writing by every freelancer who touched the product. Customer contracts in one place, with the change of control clauses read.

The same goes for the earnings figure. A buyer rebuilds it from the bottom up, and a seller who has not done that first negotiates from whatever the buyer produces. Our piece on EBITDA normalisation and what really moves the valuation sets out how the rebuild works. This is the most avoidable leak in the whole exercise: a gap you could have closed for a few thousand euros gets found by an adviser under time pressure and priced as a risk.

Phase two, the scope letter: what gets examined, by whom, and for how long

Before a single document is uploaded, three things get settled: the scope, meaning which workstreams run and what is excluded, the materiality threshold below which a finding goes unreported, and the calendar, meaning how long exclusivity lasts and when confirmatory work ends. Sellers routinely give all three away. Open-ended scope lets the buyer keep opening new fronts. No threshold fills the report with small items that create an impression of disorder. Exclusivity with no end date means the other interested party, your only real alternative, has gone cold by the time the price conversation reopens.

You also learn who you are dealing with. In Belgium the financial workstream is usually run by a registered auditor (réviseur d'entreprises), a title restricted by law to people and firms entered in the public register kept by the Institute of Registered Auditors (Institut des Réviseurs d'Entreprises), supervised by the College of Supervision of Registered Auditors (Collège de supervision des réviseurs d'entreprises). Legal work sits with a law firm, tax with a tax practice, and some buyers add a due diligence consultant for one technical question. Ask for the names: a junior team on a tight fee produces a longer list of unresolved points than an experienced one.

Phase three, the data room, and the personal data that must stay out of it

Access is staged: commercial and financial material first, legal next, the sensitive files once the buyer has proved serious. Every download is logged. Where the buyer is a competitor, customer level pricing and supplier terms go to a clean team, a ring-fenced group who see the detail without sitting in the commercial organisation.

The GDPR limits what can go in at all. Personnel files, CVs, absence records, disciplinary papers and anything touching health are not data room material in raw form. What works is replacing names with employee numbers and aggregating payroll by function and seniority, with only the handful of named contracts the buyer genuinely needs. The European Data Protection Board is explicit that pseudonymisation reduces the linkability of data to a person without cutting that link, while anonymisation makes data unlinkable and takes it outside data protection law. So a payroll file with employee numbers is still personal data, and it still needs a lawful basis and a record of who saw it.

Value leaks in both directions here. Upload everything and you create a compliance problem and hand a competitor information they keep after the deal dies. Redact too hard and the buyer prices uncertainty rather than risk, which always costs more.

Phase four, the due diligence workstreams, running in parallel

M&A due diligence is four to six reviews happening at once, each with its own team, its own report and its own way of turning a finding into a number.

Financial due diligence and the quality of earnings

The financial team rebuilds sustainable earnings, then tests the two items that convert enterprise value into what lands in your bank account: net debt and working capital. Sellers underestimate the second, because the normal level is a negotiated assumption rather than a fact, and the gap between two defensible versions of it is real money. We set out the mechanics in working capital as the overlooked lever in the EV to equity value bridge. Revenue recognition, customer concentration and the durability of recurring revenue get tested in the same pass.

Tax and social security, the checks a Belgian buyer never skips

Belgian buyers look at a predictable set of exposures. Transfer pricing and management fees between the operating company and the founder's holding. VAT on cross-border supplies. Stock option plans, and whether they were granted in a way that holds up under the law of 26 March 1999. On the social side: joint committee classification, holiday pay provisions, and self-employed contractors whose working arrangements look enough like employment to invite requalification.

Deal structure decides who carries all of it. In a share deal that history stays inside the company you are buying, which is why the buyer's team goes through it line by line. In an asset deal the buyer will insist on certificates from the tax administration and the social security authorities confirming there are no outstanding debts, because without them the transferee can be pursued for the seller's arrears.

Legal, commercial and management

The legal team reads what the value depends on. Change of control clauses in the top customer contracts, because a right to terminate on a change of shareholder is a lever your buyer would rather find than inherit. Bank covenants. Lease end dates. Ownership of trademarks and domain names, which often sit in a founder's personal name. Litigation, live and threatened. Non-compete undertakings, yours and your key people's.

Running alongside it is management due diligence, which turns on three questions: who really holds the customer relationships, whether a second line exists below the founder, and who intends to stay after closing. A management due diligence checklist that asks for organisation charts and job descriptions but never reaches those questions has tested nothing.

Technical due diligence, when the value sits in the code

For a software business this workstream carries as much weight as the financial one, and Belgian sellers prepare for it least. Called technical due diligence in English and due diligence technique in French, it is run by engineers rather than accountants. The technical due diligence process usually starts with a code and architecture review, then a walkthrough with the lead developers, then a written report with a remediation cost attached.

What a serious tech due diligence checklist tests:

• Chain of title over the code, meaning a written assignment from every contractor, agency and intern who committed to the repository, because one missing assignment puts ownership of a component in doubt.
• Open source licence compliance, in particular whether copyleft licensed components have been linked into the proprietary codebase in a way that could oblige you to release your own source.
• Concentration risk in people and infrastructure, from the one engineer who understands the billing logic to a hosting setup whose cost per customer rises faster than revenue.

The rest of a technical due diligence checklist covers test coverage, environment separation, secrets management, incident history, and the capital expenditure needed in the first two years to bring the platform to the standard the buyer's group runs. That last number matters more than any single finding, because it comes straight off the price. A buyer with an in-house CTO often runs a due diligence technology checklist alongside the external report.

Phase five, the question log: where findings become leverage

Once the reports start landing, the deal runs through a question and answer log. Every request goes in writing, every answer goes back in writing, and both sides see the history. This looks administrative. It is also where the SPA is quietly being drafted, because what you disclose in the log becomes the disclosure that qualifies the warranties you will later give.

Two habits cost sellers money. The first is drip feeding, releasing a known problem in instalments so it looks smaller. A buyer who catches one omission re-tests everything and reprices the whole file. The second is answering fast rather than accurately. An answer given by a founder at eleven at night, without the adviser who knows how it lands in the warranty schedule, is hard to walk back.

Phase six, how a finding turns into money, and what closing does to it

Every finding takes one of a few routes, depending on how quantified and how likely it is. A quantified, near-certain exposure comes off the price. A quantified but contingent one, a pending tax assessment for instance, becomes a specific indemnity backed by an escrow so there is something to claim against. An unquantified, unlikely risk stays as a warranty. A risk nobody can size becomes a condition precedent, or the reason a buyer walks.

Which route you accept matters more than the size of the finding. A price reduction is certain and permanent. An indemnity is contingent and may never be called, but it survives closing and needs a solvent counterparty behind it, the trap described in M&A warranties without solvency. Trading a euro of price for a euro of indemnity cap usually favours the seller. Accepting an escrow with a five year release date rarely does.

Then signing and closing separate, and the scrutiny does not stop. Conditions have to be satisfied, sometimes a competition filing, and the warranties are repeated against an updated disclosure. A locked box also fixes the equity price on a past balance sheet date, leaving the economics of the intervening period with one side or the other. Our article on locked box mechanisms in Belgian M&A covers what that choice does to your proceeds.

The two decisions that decide the outcome

The first is whether to run a vendor due diligence before going to market. It costs real money and management time, and it does two things nothing else does. It puts the difficult findings on the table while several parties are still interested, which is when a finding is cheapest. And it shortens the confirmatory phase, and with it the window in which a buyer can find a reason to renegotiate. On a clean, simple business a readiness review may be enough. On anything with a holding structure or a decade of undocumented arrangements, full vendor work pays for itself.

The second is what you concede first. Most sellers defend the headline price and give ground on warranties, caps, escrow and duration. That order is wrong for almost everyone. Price is the only element you receive in cash and keep; the rest is a contingent claim on money already paid to you. Decide before diligence starts which items you will trade and which are hard limits, and write it down, because at week ten you will not reason clearly about it.

The dups approach

At dups the financial team and the legal team work the same file, and on a diligence exercise that changes the sequence. Whoever answers a question in the log is also drafting the disclosure schedule and negotiating the indemnity, so nothing goes back to the buyer without knowing what it does to the SPA three weeks later. On a Full Deal Execution mandate the work starts before any buyer sees the company: rebuilding the earnings figure, structuring the data room with the GDPR constraints already applied, and listing the findings a buyer will make so each one has an answer and a price attached before it is ever raised.

Where a process is already under way, or an internal team is running the deal, Specialist Support takes the parts that decide the outcome: the vendor review, the coordination of five workstreams that all report in the same fortnight, and the negotiation that converts a report into price, warranties and escrow. On either model the aim is that a finding surfaces while you still have a second interested party to point at.

Here is a test you can run this afternoon. Open our data room due diligence checklist, mark every item you could produce by Friday, and read what is left: that is the list a buyer will find for you, and price. Please note that this list includes the essentials, it is not exhaustive.

Questions we get asked about due diligence

What is due diligence, in plain terms?

Due diligence is the verification stage of a transaction. After a letter of intent is signed, the buyer's financial, tax, legal and technical advisers examine the target's documents and question management to confirm that what was presented is accurate and to identify risks. The findings then feed directly into the final price, the warranties and any indemnities in the sale agreement.

How long does due diligence take on a Belgian mid market deal?

Four to eight weeks is the usual span for the confirmatory phase on a Belgian mid market deal, with holding structures and multiple entities pushing it longer. The variable is rarely the buyer's speed. It is how fast the seller produces complete answers, which is why the preparation done before the letter of intent shortens everything that comes after it.

Do we need a due diligence consultant, or can our accountant handle it?

Your accountant knows the numbers but usually not the transaction. Financial due diligence differs from an audit: it tests sustainable earnings, net debt and working capital as a buyer defines them, then translates findings into price and contractual protection. Most Belgian sellers use their accountant for the underlying data and a transaction adviser for the interpretation and the negotiation.

Louis Vanheurck de Tornaco, COO at dups