What Happens if Due Diligence Is Not Finished Before the Contract Deadline?
Updated: 1 day ago
GUEST AUTHOR | Blackhall & Co
Today’s guest post is by Blackhall & Co. Blackhall & Co helps buyers find businesses worth owning. Opinions expressed by guest authors are their own and do not necessarily reflect the views of Fairlane Finance.
If due diligence is unfinished before the contract deadline, you need timely legal advice about the required decision or notice, because missing information does not automatically give you more time.
For an Australian accountant buying a practice, an approaching date can sharpen an uncomfortable question: do you know enough to take the next step?
The vendor may be cooperating, the review may be progressing and the opportunity may still look attractive. None of those developments tells you what the contract requires when the deadline arrives.
The useful response brings three things together: the evidence still missing, your solicitor’s interpretation of the condition and the current funding position. That allows you to discuss a supported decision instead of letting the calendar make one for you.
The short answer
Tell your solicitor early if the agreed review may not finish on time.
Identify the material unanswered questions, their significance and the work needed to resolve them.
Confirm the exact deadline, decision requirements and notice process under your documents.
You should ask your solicitor to confirm any valid change to the deadline, because requesting an extension does not establish that it has been agreed.
Inform your acquisition finance adviser if findings alter earnings, price, operating assumptions or funding needs.
An unfinished review and an unresolved condition are different things
Due diligence is the investigation. A contractual condition sets the agreed process for addressing that investigation within the transaction.
They are connected, but completing a spreadsheet or receiving a report does not necessarily satisfy the condition. Equally, a condition deadline does not establish that the underlying business has been adequately examined.
The Australian Government’s guide to buying an existing business highlights financial records, operations and legal documents as areas to review. In an accounting practice, the unresolved issue might concern revenue evidence, a key employee, client relationships or the cost of replacing the vendor. The importance depends on what that answer could change for you.
Your solicitor should explain whether the contract calls for satisfaction, a particular objection, supporting information or a formal notice. They should also clarify what happens if no action is taken. There is no single Australian rule that makes every unfinished review extend, terminate or preserve the buyer’s position automatically.
Work out why due diligence is still incomplete
Business Queensland's due-diligence guidance describes gathering documents, raising information requests and drawing on advisers. Those are related activities, but they each need time.
A file arriving in the data room is the start of its examination, rather than proof that the relevant question has been answered.
A general update that the review is ‘nearly finished’ can conceal quite different situations.
Perhaps the records arrived late. Perhaps your adviser has the documents but needs time to reconcile them. Or a promising set of accounts may have led to a new question that deserves closer examination.
For example, annual revenue may agree to the financial statements while the underlying client information remains insufficient to understand which relationships generate it. A missing client-group schedule could matter more than several administrative documents already received. The point is to explain the decision affected by the gap, rather than merely count outstanding files.
Your due-diligence adviser can distinguish information received from information reviewed, and questions raised from questions answered.
A written status summary helps everyone see what is genuinely complete. It also makes a request for further time more credible because the remaining work and its purpose are visible.
Ask your solicitor what the deadline actually requires
Before treating the date as a routine milestone, establish when the review period begins and ends, including any relevant time of day. Ask how the documents calculate days and deal with public holidays. As with earlier commitments before signing or paying, the contractual position should come from the solicitor reviewing your transaction, rather than from a general online checklist.
Also ask who must receive any communication, how it must be delivered and whether a separate period applies to exercising a right. An informal conversation with the selling broker may help commercially, but you should not assume it performs the function of a notice required by the contract.
If records have not been provided as expected, give your solicitor the requests, responses and chronology. They can assess any relevant obligations and available options.
You should not infer a right to stop, a deposit refund or additional time simply because the vendor has been slow to respond.
Decide which unanswered questions are material
The practical concern is whether the missing answer could change your purchase decision, price, funding or operating plan.
A minor formatting discrepancy may be manageable. Unverified recurring fees, disputed WIP or an uncertain vendor handover can reach much further into the economics of ownership.
Business Victoria's business-purchase guidance recommends checking financial records, verifying seller claims and having a lawyer review the sale contract. Although these are useful foundations for identifying a material gap, your solicitor must still interpret the specific condition governing your own transaction.
Consider the vendor’s contribution to the practice. If you still do not know who will perform their technical review and client-management work, an earnings adjustment may depend on an untested replacement cost. Pressure to finish the review does not supply that missing evidence.
A useful summary separates verified facts, reasonable explanations awaiting support and unresolved matters.
For each material gap, record the possible effect and who can resolve it. This gives you a clearer basis for discussing further investigation, revised terms or another response with your advisers.
If more time is needed, make the request concrete
An extension discussion is more useful when it explains why the work cannot finish, what remains and when an informed decision could realistically be made.
Allow for both receiving the evidence and reviewing it. A new date that only covers document delivery may leave the same problem waiting at the next deadline.
The vendor may agree, decline or propose additional terms. Have your solicitor address how the change must be documented and what action is needed while a response is outstanding. Until they confirm the position, do not treat a proposed date as replacing the existing deadline.
Other dates may need attention too. Extra review time could affect finance, landlord documentation or settlement preparation. The revised timetable should allow the remaining workstreams to catch up, rather than merely move one date in isolation.
An illustrative example: the missing debtor evidence
Suppose a buyer is approaching the review deadline and has received the practice’s financial statements, but not subsequent receipts supporting a material debtor balance included in the purchase. The buyer’s adviser cannot yet assess how much cash is likely to be recovered.
The buyer asks the adviser to explain the exposure and remaining evidence, then gives that summary to the solicitor. They discuss whether additional time or another contractual response is available.
Your acquisition finance adviser is told that the expected opening cash position may change. An extension is requested, but the buyer does not assume it has been secured.
This is an illustrative situation, not a legal outcome. Available options depend on the documents and circumstances. Its lesson is the sequence: identify the uncertainty, obtain advice and coordinate the consequences before making a further commitment.
Keep the funding picture current
A delay can reveal a funding issue as well as a timing issue. Unrecoverable debtors, higher replacement staffing costs or additional transition expenditure may change the assumptions behind the acquisition finance proposal.
Tell your acquisition finance adviser when a material finding emerges, even if negotiations are continuing.
Ask what information the lender may need and whether an earlier funding position requires review. Loan approval does not verify the acquisition for you, and lender assessment does not alter the contract’s due-diligence deadline. Your solicitor and finance adviser need the same current facts for their different responsibilities.
Frequently asked questions
Does asking for missing documents extend the review period?
Do not assume so. Ask your solicitor whether the contract provides any relevant mechanism and whether a valid extension has been agreed.
Can I terminate because the review is unfinished?
That depends on your documents, applicable law and circumstances. Your solicitor should explain any available right, requirements and deadline before you act.
What if the vendor says we can finish checking after settlement?
Assess which risks you would accept by proceeding without the answers. You should ask your advisers whether proposed protections address those risks, because a promise of later access does not resolve every uncertainty.
Should your acquisition finance adviser receive unfinished findings?
Yes, where they may materially affect finance. Explain what is confirmed, what remains uncertain and when further evidence is expected, so provisional figures are not presented as established facts.
Leave time for the decision, not just the investigation
A review deadline is most manageable when it triggers an earlier conversation.
Bring the outstanding evidence, legal requirements and funding implications together while there is still time to respond. The decision should reflect what you know, what remains uncertain and the commitments your next step would create.
Sources and further reading
Contributor disclaimer: This article is contributed by Blackhall & Co and published on the Fairlane Finance website. The views, opinions and conclusions expressed are those of the contributor alone, not statements of Fairlane Finance’s position. Publication does not constitute Fairlane Finance’s endorsement of the contributor’s views, services or any proposed acquisition.
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