Your buyer will forgive bad news, not late news

What will a buyer ask me when I sell, and what is the thing that kills the deal?

Most owners expect the answer to be a bad number. A soft year, a lost customer, a margin that slipped. So they spend the months before a sale trying to make the numbers look better.

That is rarely what ends it. Buyers price bad news every day. It is their job.

What ends a deal is the surprise. The dispute that turns up in the data room, the contract that was never signed, the staff entitlement nobody mentioned — something the seller knew about and did not say.

Almost every owner I sit with before a sale is worried about the wrong conversation.

Run the buyer's due diligence before the buyer does

The fix is to do their work first. Run your own due diligence on your own business, then put the bad news in front of the buyer early, in writing, with the plan beside it.

Here is why the order matters. A buyer who finds one undisclosed problem does not just deduct it. They stop trusting everything else you told them, and every figure gets tested again at a discount. One surprise reprices the whole business.

Disclosed first, a problem is a line in the document. Found later, it is a reason to doubt the rest.

So before anyone signs a confidentiality agreement, sit down and go looking for what a buyer's accountant and lawyer will go looking for.

• Customer contracts. Which ones are signed, which have expired, and which have a change-of-control clause that lets the customer walk when you sell.
• Disputes. Anything live or threatened — a customer, a supplier, a former employee, a council.
• Tax. Lodgements up to date, no open queries, nothing that relies on a generous reading of the rules.
• Leases. Term remaining, options, and whether the landlord has to consent to an assignment.
• Staff entitlements. Leave balances, super, award classifications, anyone paid in a way that would not survive a close look.
• Handshakes. Every arrangement that works because of a relationship rather than a document. Supplier pricing, a referral partner, a verbal promise to a key employee.

Then write it up. What the issue is, what it could cost, and what you are already doing about it. That page goes to the buyer before they ask.

The honest objection is that this costs money. Name a problem and the buyer will price it, and the number will come down a little. That is real.

Hiding it risks more than the price. It risks the whole deal, and after settlement it sits under the warranties you signed. Disclosure costs you a slice. Concealment puts the whole cheque on the table.

HP and Autonomy: the truth that arrived after the signature

In 2011, Hewlett-Packard bought the British software company Autonomy for about $11 billion.

A year later, in November 2012, HP wrote down $8.8 billion of that value. It attributed more than $5 billion of the write-down to what it called serious accounting improprieties at Autonomy before the sale.

The dispute went to London's High Court. In January 2022, Mr Justice Hildyard found that Autonomy's founder Mike Lynch and former finance chief Sushovan Hussain had inflated the apparent value of the business, including by concealing hardware sales used to mask a shortfall in the software sales HP was paying for. HP had substantially succeeded.

The story did not end cleanly. In June 2024, a jury in San Francisco acquitted Lynch of all criminal charges in the United States. In July 2025, the High Court assessed HP's loss at around £700 million — far below the roughly $4 billion HP had claimed, with the judge finding the claim had been exaggerated.

Most people read this as a buyer that did not check properly. HP's own due diligence was heavily criticised at the time, and fairly.

That is the wrong lesson for a seller. The real lesson is what happens when the truth arrives after the signature. It did not cost a discount. It cost fourteen years of write-downs, courtrooms and reputations, on every side of the table.

A problem disclosed before signing is a negotiation. The same problem found after is a lawsuit.

Why I am recommending it

I do this before every sale and every raise, and I have for years.

I have raised more than $65 million across three rounds for companies I worked with. Every one of those raises ran through someone else's due diligence, and the pattern never changed.

Bad news in the pack gets discussed and priced. Bad news an investor has to dig for changes the meeting. The conversation stops being about the business and starts being about whether they can believe you.

So now the hardest page goes in first. The dispute, the expiring lease, the customer who could leave. Written plainly, with what we are doing about it.

It does not make the business look perfect. It makes the seller look like someone who already knew.

Do this before Friday

Take a single page and write down the three things you would least like a buyer to find. Not the obvious ones. The ones you have been quietly hoping nobody asks about.

Beside each one, write what it could cost and one thing you could do about it this quarter.

By Friday, show that page to your accountant. If you could not bring yourself to write something on it, that is the first thing a buyer will find.