Buyers look, during a due diligence, in any case at contracts, ownership, employment law and ongoing disputes. If documents are missing here or if there are ambiguities, this delays the process or depresses the price, regardless of how good the underlying figures are.
A buyer wants to know whether revenue is locked in or standing on loose sand. Contracts without a fixed term, with a one-month notice period, or with a change-of-control clause that gives the customer the right to leave upon a change of ownership, are points that surface in due diligence. At a company of, say, 150 employees with three customers who together form a large part of revenue, the question is not only how large that dependency is, but also how the contracts around it have been laid down. That directly affects how predictable the revenue appears, and thus how do you substantiate earnings quality.
Employment contracts, non-compete and non-solicitation clauses, and arrangements with managers that are not on paper are a recurring point. In a sale of a technical company with a stable core of experienced technicians, it can happen that verbal agreements about bonuses or career progression were never recorded. A buyer who comes across that asks questions about what else is not on paper. The same applies to the director personally: contracts and powers of attorney say nothing about whether the company keeps functioning without that person, and that is exactly what what does succession readiness mean for the price addresses.
Who owns software, brand name, patents or process descriptions seems self-evident until it is actually checked. At companies that grew out of a sole proprietorship or family business, intellectual property is sometimes still registered in the personal name of the founder, or a brand was never registered. Licenses registered under an employee who has since left, or an environmental permit that expired without anyone noticing, raise similar questions during due diligence. These are matters established beforehand with a legal check, not something a tool fills in figures for.
A drawn-out labor conflict, a claim from a former supplier, or a tax discussion that has not yet been concluded: buyers want to know this before making an offer, not afterwards. Matters that never reached a formal procedure, such as a verbal commitment to a customer that was not honored, can also still surface during due diligence. The greater the uncertainty about the scope of a dispute, the greater the chance that a buyer withholds part of the offer or attaches conditions to it.
At companies with their own business premises or lease arrangements, the question is who holds which security interests, and whether financiers must consent to a sale. A bank holding a right of pledge on receivables or inventory, or a landlord with a clause that voids the contract upon a share transfer, can determine the pace of a transaction independently of what buyer and seller themselves want.
None of these points on their own changes the value of a company, but they do determine how certain a buyer is about what they are buying. Ambiguity leads to lower bids, longer negotiations or clauses that defer part of the price. A scan that maps eight value drivers and owner dependency shows where that risk is greatest and how sensitive the value range is to it; anyone who first wants to know where they stand can fill in the free test 'how buyer-ready are you', eight questions with an indication per driver.
The legal files can be organized with a lawyer or notary; that is specialized work and not part of this scan. Owner dependency and the quality of management information can indeed be traced back to something concrete: which tasks are currently still tied to one person. Which of those tasks are transferable to employees or to AI, and what that means for succession readiness, is worked out in the work scan on ftetoai.com.