How to buy a business in the UK: valuation, financing and due diligence

Buying an existing company can accelerate growth, but success hinges on planning and disciplined execution.

This guide covers the essentials: building an acquisition business plan that aligns with wider strategy, forming a robust valuation, transaction structuring considerations (including how earn‑outs can protect buyers), evaluating funding options, and running risk-based financial, tax and legal due diligence (DD) with red‑flag DD for smaller, lower‑risk deals.

We also outline regulatory and SPA considerations, and why ESG findings can influence pricing or even derail a transaction. By the end, you’ll know what to prepare before, during and after the process to improve deal certainty and post‑completion outcomes.

What should your acquisition business plan include before buying a UK company?

A strong acquisition business plan ensures alignment between the deal and your wider strategy and tests non‑financial fit – geography, brand alignment, industry/service line experience, sector alignment, culture, and systems/controls – before you start the transaction.

Each potential acquisition opportunity should be critically assessed against more than just economic factors. Potential considerations include:

• Will the acquisition expand the buyer’s geographical reach?
• Are the brands and reputations of the two businesses aligned?
• Does the acquisition represent a move into a new industry or service line?
• Do potential synergies exist between the two businesses outside of pure cost savings?
• Are the two businesses culturally compatible?
• Do the two businesses operate similar systems and control environments?

How do you determine the value of a UK business?

Before negotiating, establish a well‑founded valuation (using an appropriate method based on the target’s sector and financials, including the stress‑testing of forecasts if applicable) and seek independent buy‑side input to ensure the valuation is suitably robust.

Before making a formal offer, forming a commercial view of how much the business is worth is essential. The nature of the target business and the industry in which it operates can have an influence on the most appropriate valuation method. The target’s financial position, current trading and projected future earnings can all impact on the valuation outcome and therefore require careful consideration by an acquirer.

When using projected financial performance to determine valuation, it’s important to ensure that forecasts are realistic, achievable, and that the underlying assumptions and drivers have been scrutinised and sensitised appropriately. Typically, where projections are key to valuation, we would expect appropriate protection against future underperformance against forecasts. This is commonly achieved through the use of an earn-out mechanism, which makes a certain proportion of total consideration contingent on forecast performance being achieved by a certain time or date.

Buy-side valuation services provide an independent analysis of the key drivers and issues underpinning the valuation of a business or part of a business. This analysis can form the basis of subsequent negotiations between the two parties in agreeing headline price and deal structure. Potential key risks to be reviewed in further detail during due diligence can also be identified at this stage.

How should you structure the deal and plan post-completion operations?

Consider transaction structuring early to ensure a tax‑efficient mix of upfront and deferred consideration (including any earn‑outs), and plan post‑completion operations by retaining and incentivising key managers (often the outgoing owners) through service agreements aligned to any earn‑out mechanism, management incentive structures and clear succession plans.

It’s never too early to start planning. Once a target business has been identified, a buyer should be thinking about transaction structure and planning :

• What proportion of consideration will be upfront versus deferred, and
• Whether an earn-out mechanism is appropriate, and any post-completion conditions.

It’s also necessary to consider the structure of the transaction from a tax perspective, to ensure the process is as tax efficient as possible for both parties.

Planning for how the business is to be operated post-completion is critical. Usually, a buyer will seek to retain key members of the existing management team to ensure a seamless transition and to minimise any disruption to trading. In addition to earn‑out arrangements, buyers should consider wider management incentive structures to align interests and support value creation post‑completion. These can include management equity rollovers, growth‑share arrangements or option‑based incentives, which allow key managers to participate in future upside alongside the buyer. Such structures are commonly used where the ongoing involvement of management is critical to delivering the investment case.

It can be advisable to align this period to any agreed earn-out period to ensure that outgoing shareholders remain incentivised throughout the post-transaction period. It’s important to negotiate these arrangements and to set expectations with these individuals before completion, and to begin considering succession plans for these roles beyond the earn-out period.

In 2025, we assisted clients across various sectors with transactions totalling £700 million.

How can buyers finance a UK acquisition with cash or debt?

Once you’ve set a valuation, decide how you’ll fund the initial cash, any deferred consideration and transaction fees.

A buyer may be able to fund an acquisition through its profit-generated cash reserves, but in many cases, buyers seek to raise funding from banks or alternative finance providers to support these transactions. Where external funding is required, it’s advisable for a buyer to consider appointing a specialist debt adviser to assist with a fundraising process.

What due diligence do UK buyers need (financial, tax, legal)?

Run risk‑based due diligence (financial, tax and legal at minimum, adding commercial/ESG/tech/HR where material, considering a red‑flag review for smaller deals) to validate performance and projections, surface tax liabilities and any historic compliance issues, and inform price, SPA protections and overall deal viability.

Due diligence is the process of gathering and analysing information about a target business in order to identify any potential risks that may be relevant to price negotiations, to the level of protection required in a sale and purchase agreement (SPA), or, in some circumstances, to the ultimate success or failure of the deal.

It’s always recommended that a buyer should obtain financial, tax and legal due diligence before completing any deal, irrespective of the purchase price or industry. Buyers may also consider it appropriate to obtain commercial, environmental, social and governance (ESG), and technology due diligence depending on the target’s industry and operations, the size of the deal, and the perceived level of risk in each of these areas. On smaller and/or lower risk deals, a buyer may instruct advisers to carry out red-flag due diligence exercises. Red-flag due diligence is less complex and is intended to identify potential deal breakers as early as possible, this typically focuses only on areas that directly impact pricing or core business activities.

What is financial due diligence?

Financial due diligence involves a detailed review of a target’s financial health and performance, including a review of historical trading, the identification of any financial risks, and a review of the target’s projected future performance. Generally, financial due diligence includes a detailed review of monthly management information, annual statutory accounts, and detailed forecasts, as well as through detailed discussions with the target’s management team. The benefits of obtaining financial due diligence include:

1. Obtaining a detailed understanding of the target’s historical financial performance. This includes understanding key drivers of profitability, the impact of seasonality on the business, and the extent to which the business is reliant on key clients and suppliers.
2. Providing a detailed understanding of the nature and value of the target entity’s assets and liabilities.
3. Ensuring that any price-impacting aspects of a target’s financials have been properly considered, including quality of earnings analysis and identification of debt and debt-like items. Most transactions also include an adjustment for working capital and so financial due diligence typically includes a comprehensive view on what a normal level of working capital is for the target entity, including a view on the price adjustment required to reflect any surplus or deficit of working capital at completion. Having an experienced adviser on board that understands the nuances of transaction mechanics reduces friction in a transaction and provides an objective view on potentially contentious areas.
4. Providing an assessment of the assumptions underlying the financial projections, including a comparison of these assumptions to actual historical financial performance. This can be critical to pricing and to setting the parameters of any earn-out.
5. Depending on the level of detail requested by a buyer, financial due diligence can also provide context on wider commercial aspects of the deal, such as market outlooks and trends, including the target’s competitive advantage within its given sector or industry.

Is tax due diligence important?

Tax due diligence is very important. It identifies unrecorded tax liabilities,  provides assurance over historical tax compliance, and surfaces opportunities to optimise deal structure and pricing – reducing the risk of post-transaction surprises. For example, our financial and tax due diligence for Stanhope and Cheyne Capital on the £450 million Row One South Bank acquisition helped the buyers navigate complex tax considerations and proceed with confidence. Read the case study.

[Get in touch to see how the team can assist]

What legal checks and documents do you need when buying a UK business?

Conduct thorough legal due diligence by reviewing contracts, ownership/title, intellectual property and compliance to assess legal risks, then have counsel draft the SPA and ancillary documents so the agreed terms are accurately captured and both parties are properly protected.

As well as financial and tax due diligence, a buyer should conduct appropriate legal due diligence. This involves reviewing the target business’ contracts, verification of ownership and title, intellectual property, and the assessment of the business’ compliance record and other legal documentation. The primary purpose of legal due diligence in a corporate transaction is to thoroughly assess and evaluate the legal aspects and risks associated with the target company. This process is crucial for the acquiring company to make informed decisions and mitigate potential legal liabilities.

The role of the legal adviser continues beyond due diligence into the drafting of the SPA and other legal documentation, which is key to ensure that the terms of the deal that have been commercially agreed between the two parties are properly reflected in the definitive sale documentation, with appropriate protections in place for both the buyer and seller.

Why does ESG due diligence matter in UK acquisitions?

ESG due diligence helps UK buyers identify material environmental, social and governance risks and climate‑reporting gaps, align acquisitions with responsible practice, and prevent issues that could affect pricing or even stop the deal.

ESG due diligence is increasingly common in corporate transactions. This enables the acquiring company to identify and understand the environmental, social, and governance risks and opportunities associated with the target company, including its compliance with necessary climate reporting requirements. This process helps buyers to make informed decisions that align with responsible and sustainable business practices.

Sustainable practices are no longer a choice, but a prerequisite for resilience and growth. It’s therefore unsurprising that research* conducted by KPMG showed that 53% of investors surveyed in 2023 had cancelled merger and acquisition (M&A) deals because of material findings in ESG due diligence.

How can Saffery support you through buying a UK business?

Buying a business is complex; we make it manageable. Our team will test the numbers, surface risks, and shape the right deal structure, so you negotiate from a position of strength and protect value through completion.

What our Transaction Services Team can do for you:

• Financial due diligence,
• Tax due diligence,
• Red-flag bid support,
• Valuation services,
• Offer, Heads of Terms and SPA review,
• Taxation structuring,
• Financial model review,
• Completion review, and
• Buy-side advisory services.

Get in touch with Seb Cartwright to arrange a call. Tell us your target and timeline, and we’ll tailor a scope around your objectives and risk profile.

You can also find out more about the deals we’ve worked on.

*KPMG: More than half of firms have cancelled M&A deals because of ESG findings

FAQs

1. When should I start planning an acquisition?
   As soon as a target is identified; shape deal structure, terms and post‑completion plans early to reduce execution risk.
2. How do I check if a target fits our strategy?
   Test non‑financial fit as well as economics: geography, brand alignment, sector exposure, operational synergies, culture and systems/controls.
3. How do you value a UK business?
   Choose a method suited to the target and sector, assess financial position and outlook, and scrutinise forecasts before negotiations.
4. What is an earn‑out, and when is it used?
   An earn‑out ties part of the price to future performance –useful when projections drive valuation to protect against under‑performance.
5. Should I get an independent valuation?
   Yes. Buy‑side valuation provides objective analysis of value drivers, surfaces risks early and informs price and deal structure.
6. How can buyers finance an acquisition?
   From cash reserves or via bank and alternative lenders; if raising externally, a specialist debt adviser can help structure and secure the right package.
7. What due diligence do UK buyers need as standard?
   Financial, tax and legal on every deal, with commercial, ESG, HR and technology reviews added where sector, size or risk profile warrant it.
8. What is a red‑flag due diligence?
   A lighter, early‑stage review focused on potential deal‑breakers and price‑critical issues that is often used on smaller or lower‑risk transactions.
9. What does legal due diligence cover?
   Contracts, ownership/title, intellectual property and compliance, followed by counsel drafting the SPA and documents to embed protections.
10. How do we ensure continuity post‑completion?
    Retain and incentivise key managers (often outgoing owners) with service agreements aligned to any earn‑out, and set clear succession plans.
11. Why does ESG due diligence matter?
    It can influence pricing and, in some cases, stop a deal.