What the investigation is
Due diligence — literally: appropriate care — is the buyer's verification of everything the seller presented. It takes place after the letter of intent and before the final contract. The seller opens the administration, usually in a secured digital data room, and your advisers work through it. Count on four to eight weeks.
Area 1: the figures
Does the profit that carries the asking price hold up? Your accountant checks the last three annual accounts, the match with the bank statements, the age of the receivables (is there revenue that has sat unpaid for months?), the valuation of the stock and the completeness of the debts.
Special attention goes to the normalisation: which private costs ran through the books, what salary did the owner pay himself, which items were one-off. The same maths that set the price gets tested against reality here.
Area 2: the tax position
Have all returns been filed and paid — corporate income tax, VAT, payroll taxes? Are there open discussions with the Dutch tax authority? In a share purchase you take over the full tax history: an assessment over three years ago lands on your plate. This area is the main reason buyers demand guarantees.
Area 3: the contracts
Three questions per key contract. Does it exist on paper, signed? What are the term and the notice period? And does it contain a clause that triggers on a change of owner — some customer and supplier contracts give the counterparty the right to terminate when the company changes hands. For the largest customers you want to know that before closing, and secure their consent where needed.
Also check the lease of the premises and whether it can move to the new situation, the intellectual property (is the brand registered, and in whose name?), and pending disputes.
Area 4: the staff
Who works there, on which contract, at what salary, with which promises? Watch for arrangements made outside the contracts: a promised bonus, a thirteenth month that "has always been paid", a pension scheme with arrears. In a Dutch acquisition employees transfer with all their rights — how that works sits in the employee rule.
Area 5: permits and insurance
Are all permits current and transferable? Some are tied to the legal entity and travel along in a share deal, but must be re-applied for in an asset deal. The same goes for certifications your customers require. And: which risks are insured — and which turn out to be almost insured?
What you do with the findings
Nearly every investigation surfaces something. Findings land in three places.
In the price. Stock valued too high comes straight off.
In guarantees and indemnities. For risks you know but that remain uncertain — a possible tax assessment, a looming dispute — the seller guarantees the damage if it materialises. Often part of the price stays temporarily in escrow for exactly this.
In the decision. Sometimes walking away is the outcome. A well-run investigation that kills a bad deal has paid for itself.
The short version
Four to eight weeks, five areas, three destinations for what you find: price, guarantees, or walking away. Have the figures done by your accountant, the contracts by a lawyer and the tax side by a Dutch tax adviser — and steer yourself on the question behind it all: am I buying what I think I am buying? The full process sits in buying a business in the Netherlands.
What comes after this
Two pages sit directly alongside this one: Charging Your Own Foreign Company and Why International Groups Put Their Holding Company in the.