Due diligence is the process of verifying, before you are legally committed to a transaction, that the business you are buying is what the seller says it is. It is the buyer’s opportunity to examine the financial records, legal documents, contracts, liabilities, and operational details of the business in an organized, systematic way — and to identify anything that should change the price, the terms, or the decision to proceed at all.

From a legal standpoint, due diligence focuses on the documents and commitments that define what the business owns, what it owes, and what obligations it has made to others. That includes reviewing existing contracts with customers, vendors, landlords, and employees to understand what transfers and what does not. It includes examining corporate records to confirm the entity is in good standing, ownership is clear, and there are no undisclosed liens or encumbrances. It includes checking for pending or threatened litigation, regulatory issues, and any claims that could become the buyer’s problem after closing.

Due diligence is not about finding a reason to kill a deal. Most deals that go through a thorough due diligence process close — sometimes at an adjusted price, sometimes with additional protections built into the purchase agreement, but they close. What due diligence prevents is the buyer discovering after closing that they inherited a problem they had no idea existed. In Florida’s lower middle market — the segment of businesses most commonly bought and sold by individual buyers and small private equity groups — the due diligence process is often less formal than in larger transactions, which creates real risk for unprepared buyers. Engaging a transactional attorney to structure and conduct legal due diligence is one of the most important steps a buyer can take before committing to a purchase.