The Founder’s Edge – Turning Due Diligence into Your Advantage Investment ready: Strong negotiation position - favorable terms it determines the deal

When it comes to raising investment or selling your business, the due diligence phase is often viewed as a necessary hurdle something to "get through" as quickly as possible. But what if you could flip the script and use due diligence to?enhance?your position?

At?A City Law Firm, we’ve seen time and again how founders who approach this phase strategically can turn it into a competitive advantage. Preparing your data room, taking advice early and being investment ready not only enhances your opportunity and puts you in a stronger bargaining position , but it also insures a swifter and often smoother transaction.

We sadly do see many abortive transactions and those that can drag on beyond six months where we’ve not had the opportunity to advise and sanitise the documents prior to the start of the due diligence process. We explore how to take advantage of the due diligence process and explain how preparing in advance is beneficial.?

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What Is Due Diligence Really About?

For investors or buyers, due diligence is about assessing risk & true value. But for founders, it’s an opportunity to:

• Showcase the strength of your business.?Every document and response is a chance to tell a compelling story about your company’s growth, your team and strategic approach , impress on the value, and potential.
• Build trust.?A smooth, transparent process reassures investors or buyers that your business is well-managed and ready for the next stage.

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Common Pitfalls to Avoid

Over the years, we’ve encountered recurring issues that can derail the process:

1. Incomplete or inconsistent records?– Missing contracts, outdated terms, or unclear IP ownership can raise red flags. Whilst, some of these documents can be amended or created during the process concerns can often arise about the potential for contractual disputes and risks in the future where there is a lack of documentation. This results in additional warranties being requested if the founders or reduced offerings. Without concise preparation of the business going forward if fundamental documents have not been created at the onset the risk seams higher and this is often reflected in the terms and money.
2. Unexpected liabilities?– From unresolved employment disputes to unregistered trademarks, these can weaken your bargaining position. Uncertainity can mean you have to sign warranties and liabilities to assess this risk in the future or worse they walk away.
3. Reactive responses?– Scrambling to fix issues during due diligence can signal poor preparation & lose trust.

These pitfalls aren’t just about delays they can reduce the value of your deal or even result in its collapse.

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How to Turn Due Diligence Into an Opportunity

1?? Start Early Preparation is everything. A well-organised data room with accurate and up-to-date documents shows professionalism and builds confidence. Think of it as a portfolio that reflects your company’s worth.

• Our Tip:?Conduct a pre-due diligence audit. We’ll review your records, identify risks, and resolve issues before they arise.

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2?? Use It to Highlight Strengths Due diligence isn’t just about identifying problems; it’s a chance to emphasise what sets your business apart.

• Are your contracts airtight, with long-term clients? Credit processes and lack of debtors shows cashflow strengths.
• Does your IP portfolio protect your competitive edge & show value?
• Are your financials clean and transparent?

These factors reassure investors that they’re making a sound decision.

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3?? Stay Proactive Investors and buyers appreciate founders who anticipate their questions and address them head-on. By providing clear, concise answers and highlighting risk mitigation, you demonstrate control and professionalism.

• Case in Point:?We recently helped a founder streamline their due diligence by preparing in advance so it presented a concise and strategic response. The result? The process was completed in record time, with the investor offering more favourable terms than expected during negotiations.

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Why Expert Legal Support Matters

The right legal team doesn’t just react to due diligence requests—they shape the narrative. At?A City Law Firm, we:

• Audit your documents and create a structured data room.
• Address potential risks, from employment contracts to IP rights.
• Guide you in presenting your business in the best possible light.
• Support you through negotiations when issues arise.

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Your Next Steps

If you’re considering raising investment or selling your business this year, don’t wait until the due diligence phase to start preparing. Reach out to us for a free consultation. Let us help you turn potential risks into strategic advantages.

Contact us at?www.acitylawfirm.com

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