What an HVAC Buyer Asks For in Due Diligence

The First WaveThe opening requests, which should take days rather than weeks

Financial comes first and it is the most predictable part of the whole process. Three years of statutory accounts, monthly management accounts for the current year and the two before it, the aged debtor and creditor listings, VAT returns, the bank facilities and any asset finance on vehicles and plant. Then the adjustments: your own remuneration, anything personal running through the business, and any genuinely one-off costs, each with a reason attached.

Legal arrives alongside it. Statutory books and share register, the incorporation and any share transfers, property leases for premises and yards, vehicle and equipment finance agreements, insurance policies and claims history, and any litigation or dispute open or threatened in the last three years. This is usually where a forgotten personal guarantee or an unsigned lease renewal surfaces, and both are fixable if found in March rather than in June.

Neither of these two lists should take long, because almost everything in them exists already. Where owners lose time is in the adjustments, which have to be explained rather than asserted. An adjustment a buyer cannot follow is an adjustment they remove from the profit figure, and every pound removed there is removed several times over in the price.

The Slow WaveThe requests that take months, and why they cannot be hurried

The contract schedule is the single largest item and it is the one most often missing. Every maintenance and service agreement, the customer, the sites, the annual value, the term, the renewal date, the notice period, the change of control position, and ideally a renewal history. Built from scratch under pressure this takes weeks and produces something the buyer can see was built from scratch under pressure.

Certification and compliance records come next, and in this trade they are substantial. A buyer wants to see the business registered with Gas Safe, every engineer listed against it with the categories their card covers, the F-Gas company certificate and personnel certificates by category, and whatever MCS or OFTEC registration the work requires. Alongside that go the refrigerant records the regulation demands: quantities placed in and recovered from equipment, and the leak check history for systems above the relevant thresholds. Recent audit correspondence from each certification body is usually requested with them.

Then the operational evidence that proves the business does what it says. Equipment logbooks, TM44 air conditioning inspection reports for the commercial sites that require them, ductwork cleaning records where the work is in scope for TR19, method statements and risk assessments, accreditations such as CHAS, SafeContractor or Constructionline, and the health and safety record including any RIDDOR reportable incidents.

Employee information is the last of the slow items and it becomes urgent late. Where TUPE applies, employee liability information must be provided to the transferee, and it covers identities, ages, terms, disciplinary and grievance history and claims. That is a data exercise nobody enjoys doing at speed, and it lands in the weeks when everything else is also happening.

The PointWhat the buyer is really testing

Every item above is an attempt to answer one question: does this business exist independently of the person selling it. Records that are complete, current and held in a system rather than in a head are evidence that it does. Records that have to be assembled, remembered or reconstructed are evidence that it does not, whatever the accounts say.

That is why the diligence stage tends to move the price rather than merely confirm it. Findings become warranties, warranties become indemnities, and unresolved risk becomes deferred consideration. None of that is a buyer behaving badly; it is the ordinary mechanism by which uncertainty gets priced, and the way to avoid it is to remove the uncertainty before anybody asks.

There is a second effect that owners feel more than they can measure, which is the effect on their own negotiating position. A seller answering questions from a prepared file is a seller who can say no to a late request for a price adjustment. A seller three weeks behind on the information, with a buyer's adviser sending reminders, is not, because at that point the deal feels fragile and every concession looks cheaper than losing it. The file does not just save time; it decides who is comfortable in the room.

The practical instruction is the same one that ends most of these pieces. Build the contract schedule and the certification file now, in a quiet month, to the standard a stranger would need. If a sale never happens you have lost two afternoons and gained a better-run business, which is not a bad downside.

A seller answering questions from a prepared file is a seller who can say no to a late request for a price adjustment.