A key issue in private M&A is demonstrating, under due diligence, that enterprise value is legally secure, transferable and sustainable.
This article looks at where enterprise value can be lost under buyer due diligence in Australian allied health transactions and how to brace for scrutiny through vendor due diligence.
What Buyers Are Really Testing during DD
Buyer DD routinely focuses on:
- title and encumbrances
- employee vs contractor classification (Fair Work and payroll tax exposure)
- enforceability of restraints and non‑solicitation provisions
- ownership of client relationships and goodwill
- IP ownership in treatment protocols, templates and training materials
- termination and change‑of‑control clauses that may trigger revenue loss or disrupt continuity
What buyers really want to know is how sustainable business revenue is through a change in management and key personnel.
Sophisticated buyers will routinely assess:
- security of revenue sources;
- the sustainability of goodwill;
- could key revenue streams unravel post‑completion?
Businesses that exit well are those that can demonstrate, clearly and credibly through appropriate governance, that revenue is:
- controlled
- owned by the entity
- legally transferable on sale
Weak governance may be viewed as a proxy for unpredictability.
If revenue outcomes depend on individuals rather than systems, buyers may assume margin volatility and price accordingly.
What Effective Legal Vendor Due Diligence Achieves
For allied health owners and directors, sale readiness is not a last‑minute exercise about packaging financial results. It is an outcome of how maturely the business has been managed over time.
Vendor due diligence is about identifying and addressing the governance and contracting weaknesses that buyers may seek to rely on to reprice risk, defer consideration or restructure deals.
Good governance, in this context, is not corporate formality. It is about demonstrating commercial consistency.
Done well, vendor DD identifies value‑eroding risks early, reduces surprise diligence findings and allows time for remediation or structured disclosure. It allows vendors to be in a position to control the narrative before buyers do.
