Why it matters
Some caution is healthy. Before an NDA, a seller should not hand customer names or full accounts to someone they have never met, and even afterwards it is normal to release sensitive details in stages. Competitors sometimes pose as buyers, and staff can learn about a sale by accident.
The warning sign is holding back that continues after the basics are in place: the NDA is signed, a serious offer is on the table, and there are still no bank statements, tax returns or monthly figures. Records that arrive late, in part, or retyped by hand cannot easily be checked against anything else.
A seller who holds records back usually has one of a few reasons. The records do not exist, they do not support the listing, or they show something the seller would rather you did not see. None of those can be priced. If you cannot verify the earnings, any multiple you apply is applied to a number you do not know. Lenders will not usually lend on that basis, and nobody can carry out a quality of earnings review without the underlying records.
The Loupe valuation tool already marks down businesses whose records are only owner-prepared, and lowers its confidence when records are weak. Records that are withheld altogether are worse than weak ones, because there is nothing to test.
Set a clear line early. Agree in the letter of intent (heads of terms in the UK) what will be provided and by when, and treat a missed deadline without a credible reason as a reason to stop.
Non-disclosure agreement (NDA)
A non-disclosure agreement is a contract in which a potential buyer promises to keep information about a business confidential. Sellers usually ask for one before sharing the business's name or detailed figures.
A quality of earnings review is an accountant's analysis of whether a business's reported earnings are accurate, sustainable and correctly adjusted. It is not an audit.
A letter of intent sets out the main terms on which a buyer proposes to acquire a business, before due diligence and the full purchase agreement. In the UK the equivalent is usually heads of terms.
How to spot it
- The seller sends a summary spreadsheet instead of accounts, tax returns or bank statements.
- Requests are met with "the accountant has it" for weeks.
- Documents arrive as photos, scans of printouts or edited spreadsheets rather than exports from the accounting system or bank.
- Read-only access to the accounting software, payment processor or analytics account is refused.
- The seller wants a signed letter of intent, a deposit or exclusivity before sharing anything beyond the listing.
- Documents cover different periods, so they cannot be reconciled.
- Customer or supplier details stay hidden long after confidentiality protections are in place, with no plan for releasing them.
An exclusivity period is an agreed time during which the seller will not negotiate with other buyers, giving you room to complete due diligence and arrange finance.
Questions to ask the seller
- What records does the business keep, in which systems, and who prepares them?
- Can you give read-only access to the accounting software, bank feeds and payment accounts?
- Which documents will you share after the NDA, after the letter of intent and before completion (closing in the US)?
- If some information is too sensitive to share now, when and in what form will it be released?
- Why are these particular records unavailable?
- Would you let my accountant review the records directly?
Documents to request
- Filed accounts and tax returns for the last three years
- Monthly profit and loss statements for the last 24 months
- Bank statements for every business account over the same period
- Payment processor and merchant statements
- Payroll records and sales tax or VAT returns
- A customer revenue list with names removed, and names to follow at an agreed stage
- Read-only access to the accounting system