How do I check out a buyer before agreeing to sell?

Yes, you should check out any serious buyer before agreeing to sell. Most owners don’t - they assume the buyer’s interest is enough. It’s not. Checking a buyer’s track record, financing, and behavior during the process protects you from a deal that falls apart, a buyer who re-trades the price, or a new owner who runs your business into the ground after you’ve walked out the door.

Learn what makes a buyer the right fit for your business

Why the time to check out a buyer is before you sign the LOI

Once you sign a Letter of Intent with an exclusivity clause, the game changes. Exclusivity periods typically run 60 to 90 days, and during that time you cannot talk to other buyers, accept other offers, or restart the process. You’re locked in with one buyer.

If you discover three weeks into due diligence that this buyer has a reputation for re-trading prices, or that their financing is shaky, your options are bad: accept worse terms, try to renegotiate from a weak position, or walk away and lose months of sale momentum.

All of your leverage sits in the period before you sign. Use it.

Understand what an LOI commits you to before you sign one

How do you verify a buyer’s track record with prior acquisitions?

The most important thing you can do is find owners of businesses the buyer has previously acquired and call them. Not email - call. And not right at closing, when everyone says it went great. Call sellers who closed 12 to 18 months ago, when the honeymoon is over and reality has settled in.

Ask a specific question: “What surprised you 18 months after closing?” That question gets you real answers. “How did the deal go?” gets you a polished summary. The surprise question surfaces what actually changed, what promises weren’t kept, and what they wish they’d known.

For private equity buyers specifically, ask for a list of their portfolio companies and the sellers they’ve acquired. Any PE firm that won’t provide references from prior acquisitions is telling you something important.

What does the buyer’s behavior during due diligence tell you?

How a buyer behaves during the process is a preview of how they’ll behave after closing. Pay attention.

Watch for these things specifically:

• Do they respect confidentiality? A buyer who casually mentions your business details to employees, suppliers, or competitors before closing doesn’t take confidentiality seriously. That carelessness has consequences.
• Do they treat the financials review as adversarial? Some buyers use a Quality of Earnings report as a weapon, flagging every minor variance as a reason to cut the price. A fair buyer treats it as a verification process.
• Do they keep their word on small things? If they say they’ll send a document by Thursday and it shows up the following week without explanation, that’s a pattern, not a one-off.
• Do they ask about your team as people? A buyer who asks about your employees by name, their tenure, and what they need to stay, is thinking about keeping the business healthy. A buyer who only asks about headcount is thinking about cost.

See what private equity buyers actually do after they acquire a trades business

How do you verify that a buyer actually has the money to close?

A deal that falls apart after exclusivity is one of the most costly outcomes in a business sale. You’ve lost months, your employees may have gotten wind of something, and you’re restarting with less momentum. Financing failure is one of the most common reasons deals don’t close.

Before you sign any LOI, ask the buyer to show proof of financing. For individual buyers using an SBA loan, that means a pre-approval letter from a lender. For private equity or institutional buyers, it means confirming their fund size and when the fund was raised - an older fund may be nearly deployed, with less capital available than they’re implying.

A buyer who pushes back on providing any evidence of financing before you enter exclusivity is not a buyer you should be giving exclusivity to. Your broker should be making this ask on your behalf as a standard part of the process.

Your buyer due diligence checklist

Work through these before you sign the LOI:

1. Ask for references from prior acquisitions and call them directly - not email.
2. Ask each reference: “What surprised you 12 to 18 months after closing?”
3. Verify financing before signing - see proof, not a promise.
4. Watch how the buyer behaves during due diligence. Small signals are real signals.
5. Ask your broker what they know about this buyer’s reputation. A good broker has either dealt with them before or knows someone who has.
6. For PE buyers: look up their portfolio companies and search for any press coverage of acquisitions that went badly.
7. Ask the buyer directly what they plan to change in the first 90 days. Their answer tells you a lot.

Ask your broker the right questions to get useful answers

What good buyer behavior actually looks like

It’s worth knowing what you’re looking for on the positive side, not just the warning signs.

A good buyer is honest about what they plan to change. They don’t tell you nothing will change when they’re planning to cut staff or shift operations - because that conversation will happen eventually, and having it before closing is a sign of respect. They don’t rush you. They give realistic timelines and stick to them. They ask thoughtful questions about the business, not just the numbers.

They also don’t use every bump in the process to push for a lower price. Some buyers treat due diligence as a negotiating tool - finding small issues and using them to justify a re-trade. A buyer negotiating in good faith treats due diligence as verification, not a second bite at the price.

Your broker should know which buyers in your market behave well and which don’t. That institutional knowledge is part of what you’re paying them for. If your broker has never heard of the buyer you’re talking to, ask them to make calls and find out who has.

Common questions owners ask

When is the right time to check out a buyer?

Before you sign the Letter of Intent, not after. Once you sign an LOI with an exclusivity clause, you can't talk to other buyers for 60 to 90 days. If you then discover the buyer has a bad reputation or shaky financing, your options are limited: accept their terms, try to renegotiate, or walk away and restart the whole process. Do your homework on the buyer while you still have other options on the table.

What should I ask sellers who previously sold to this buyer?

Don't ask 'how did the deal go?' - that gets you a polished answer. Ask 'what surprised you 12 to 18 months after closing?' That question gets you the truth. You want to hear about how the buyer treated employees after closing, whether promises were kept, how quickly things changed, and whether they'd do it again with the same buyer.

How do I verify that a buyer actually has the money to close?

Ask for proof before you sign the LOI. For individual buyers using SBA financing, ask to see a pre-approval letter from a lender. For private equity buyers, ask about their fund size and how recently it was raised. A buyer who won't show any evidence of financing before you enter exclusivity is not a buyer you want to give exclusivity to. Your broker should be pushing for this regardless.

What if a buyer refuses to give references from prior acquisitions?

Walk away, or at minimum treat the refusal as a serious warning sign. A buyer who has made previous acquisitions and won't let you speak with those sellers is hiding something. The only reason not to provide references is that the references would hurt them. Any PE firm or serial acquirer worth dealing with will have prior sellers they're proud to put you in touch with.