Due diligence: what a fund checks before investing

Due diligence is the audit an investor runs after the letter of intent and before signing. It checks that the company matches what was presented: accounts, contracts, tax, staff, intellectual property. A complete, well-organised data room from day one shortens the exercise and avoids price renegotiations.

On the bank side, I saw files held up for weeks over a commercial lease nobody could find. Not over a substantive problem. Over a document nobody knew where to look for.

What is due diligence?

It is an adversarial review, run by the fund and its advisers (auditor, lawyer, sometimes a tax specialist), of everything you claimed during the negotiation. It comes after the letter of intent or term sheet, once the price and main terms are set, and before the final documents.

The fund is not trying to discover your company. It is looking for gaps between the file you presented and reality, because every gap turns into a lower price, a warranty or a walk-away.

What does the fund check, area by area?

Six areas come up in almost every deal. Depending on the sector, an environmental review (industrial sites), a regulatory one (health, food) or a technology one is added.

The sources for the first two areas are federal. A Liège SME negotiating with Noshaq (the Liège provincial invest), a Brussels company dealing with finance&invest.brussels (the Brussels-Capital Region's public financing body) and a Flemish business working with PMV gather the same stack of core documents. From one region to the next, the counterpart changes, not the list.

How do you prepare the data room without losing three months?

The data room is an online space where documents are filed by the areas above. A numbered index lets the fund's advisers ask precise questions, such as "document 3.4, page 2". Every document should be dated and final.

1. Sign the letter of intent and a non-disclosure agreement first. No data room before that.
2. Open the data room with a numbered index, one folder per area, dated documents.
3. Appoint one person to answer the fund's questions and keep a question log.
4. Flag known weak points yourself, with an explanation and, if possible, a fix.
5. Plan extra internal support so day-to-day management does not slow down.

The mistake I see most often: adding documents in dribs and drabs. Each upload sets off a new round of questions, and due diligence drags on.

How long does due diligence take, and what does it cost?

Not published. None of the nine players in the 15.10.2026 review (ORSA, Namur Invest, Invest.BW, Sambrinvest, Noshaq, IMBC, Wallonie Entreprendre, finance&invest.brussels, Theodorus) shows a typical duration or a due diligence fee scale on the pages consulted. I would rather tell you that than line up a figure nobody can check.

The factors that drive time and cost are well known, though:

• the number of areas audited by outside advisers;
• the state of your data room on day one;
• how quickly the person answering questions responds;
• finding an issue that forces a deeper look at one more area.

On cost, the usual rule is simple: each side pays its own advisers. The letter of intent can say otherwise, for instance the company covering the fund's costs if the deal completes. What the clause says, and what it costs you: read it before signing, not when the invoice arrives.

On support, ORSA (formerly Investsud, a Walloon evergreen investment fund) lists help with due diligence among what it offers SME buyers (ORSA's business acquisition page). To compare the tickets and instruments each fund publishes before entering this phase, see the ranking of SME funds.

Four deal-breakers, rarely dramatic

Deals seldom collapse on a bombshell. They collapse on a detail badly handled.

• A gap between the figures presented and the accounts, which damages trust more than the amount at stake.
• A key contract that can be terminated on a change of shareholder (change-of-control clause).
• Intellectual property still held in a founder's or contractor's name.
• An undisclosed dispute or tax risk.

Flagging these points yourself, with a solution, turns a deal-breaker into a negotiating point. A fund that finds a problem on its own starts wondering what else it has not found yet.

How does due diligence feed into the price, the warranties and the shareholders' agreement?

The findings feed into the final documents: final price, warranty against undisclosed liabilities, conditions precedent and the shareholders' agreement. EBITDA revised downwards flows straight into the valuation; a likely tax liability is usually handled through a warranty. Legal form matters too: in an SA or SRL, the articles and their amendments are published, which makes the legal review easier (Companies and Associations Code on ejustice).

The type of deal also changes the outcome. In a funding round, the fund subscribes for new shares: the money goes into the company, and a problem uncovered is mostly settled through the price or conditions. In a buyout, the fund or buyer purchases existing shares from the seller: this is where the warranty really matters, because the seller leaves with the price and you need recourse if a tax reassessment lands after closing.

For a warranty or a price adjustment, the decision depends on your file: get your lawyer and auditor involved.