2026 sell-side: why vendor due diligence is now the price of getting an asset sold

Exits are backed up and mid-market multiples are soft, so buyers can choose. A VDD with a credible current-trading section, a reconciled data book and the known weaknesses already dealt with is what keeps a mid-cap in the process.

The exit backlog is now the main feature of the private equity market. Bain estimates that at least 31,000 sponsor-backed companies are waiting for an exit worldwide, worth about $3.7tn, up from 29,000 a year earlier. Median holding periods are close to six years, the longest in a quarter of a century of data. Global exit value recovered in 2025, but law-firm and adviser reviews published this month agree that the recovery came mostly from large deals, and that the backlog has not shrunk.

France follows the same pattern. France Invest and Grant Thornton counted 566 divestments in the first half of 2025, 7% fewer than a year earlier, and described exits as below the expected level. Funding costs are not the obstacle any more: the ECB left its deposit rate at 2.00% in December, its fourth meeting in a row without a change.

The obstacle is price, and it is worse in the mid-market than headline numbers suggest. The Argos index of European mid-market deals fell to 8.7x EBITDA in Q3 2025, its lowest level since early 2017, while broader European multiples returned to their historical averages. In the same quarter, 28% of mid-market deals were priced below 7x, and the share above 15x hit a record low.

Buyers can choose, and they pick the clean assets

When a buyer can look at five assets in a sector instead of one, the first cut is not about strategy. It is about how much work the asset will take. A target with unexplained EBITDA adjustments, a cash conversion story that only works in some years, or a budget it has already missed goes to the bottom of the pile. It may never be formally rejected. It just drifts out of the process while the buyer's team spends its four weeks on another asset.

This is where the vendor due diligence stops being a document and starts being a filter. In the processes we have worked on over the past year, buyers did not ask "is there a VDD?". They asked whether they could rely on it, and how far it got them before their own team had to start from scratch.

What buyers re-perform anyway, and what to leave out

A VDD that tries to cover everything ends up long, late and partly ignored. Some work is always redone by the buyer's adviser, whatever the vendor report says:

1. The buyer's own quality of earnings view. The buyer will form its own view of the adjustments it accepts. The VDD should set out each adjustment with its evidence, not argue for an EBITDA number.
2. Net debt and debt-like items for the SPA. These are negotiated. The VDD should list and quantify the items, with the source documents, and leave the classification argument to the negotiation.
3. Tax and legal. W&I underwriters usually still expect some buy-side diligence, even when there is a full vendor pack, and they look at the gap between diligence materiality and policy thresholds. A VDD does not replace that, and should not pretend to.

What the buyer does not want to redo is the factual base: the monthly P&L, the revenue by customer and product, the reconciliation of the data to the audited accounts. That is where the vendor report saves time, and that is where it is judged.

The data book and the bridge to management accounts

The most common reason a buyer's team stops trusting a VDD is a reconciliation that does not work. The figures in the data book must tie to the audited accounts and to the monthly management accounts the buyer will receive after closing. If they do not, every number in the report becomes something to check again.

A worked example. On a €40m EV services business, the VDD showed EBITDA of €4.6m. The management accounts for the same twelve months showed €4.9m. The €0.3m gap came from three items: year-end accruals booked only in the statutory accounts, a reclassification of subcontractor costs between cost of sales and overheads, and a management fee booked at holding level. Each item was correct. But the bridge was not in the first draft, and a buyer would have found the difference in the first week and started reading the whole report with suspicion.

Before the data room opens, we check three things:

• Monthly figures add up to the audited annual figures, with every reconciling item listed.
• Revenue by customer adds up to total revenue in the general ledger, for every period shown.
• The definitions of KPIs in the data book are the same as those in the information memorandum and the management presentation.

This is mechanical work, but it is the work that decides whether the buyer's adviser uses the vendor data book as a starting point or rebuilds it.

Current trading is the section that keeps the process alive

In a slow process, the VDD's historical figures are often six to nine months old by the time bids come in. If the latest period is weaker than the budget, the buyer will find out from the monthly reporting, and the price discussion moves to the buyer's ground.

A credible current-trading section has a monthly run-rate up to the latest closed month, a comparison to budget and to the prior year, and an explanation of the gap in plain terms: volume, price, mix, one-offs. It also says what has changed in the order book or pipeline. We then update it at least once before final bids, and again before signing if the timetable slips.

The update is the part sellers resist most, because it can show a miss. Our advice is the opposite. A miss explained by the vendor in its own report costs less than the same miss found by the buyer two weeks before signing. With the locked-box mechanism common in mid-market deals, the buyer has no completion accounts to fall back on, so it will price any uncertainty about recent trading into its offer.

Defensive diligence on the weaknesses you already know

Every asset has two or three issues that its owner knows well. The question is who explains them first. A short defensive review, done before the VDD starts, lets the seller choose how each issue is presented and quantified.

On a €60m EV asset, a buyer who finds €1.5m of deferred capex will treat it as debt and also ask what else has been delayed. The same €1.5m presented and quantified by the seller is usually negotiated as a price item, nothing more.

What to do before launching a 2026 process

1. Decide the scope of the VDD by what the buyer will rely on, not by what looks complete. The factual base and the reconciliations come first.
2. Have the data book reconciled to the audited and management accounts before the IM is finalised, and keep the KPI definitions identical across all documents.
3. Plan the current-trading update in the timetable from the start, with a date and an owner, rather than as an option.
4. Run a short defensive review on the two or three weaknesses everyone already knows, and decide how each will be presented and quantified.
5. Remove any EBITDA adjustment you cannot document. In a market where a quarter of mid-market deals price below 7x, credibility on one number protects the others.

This note is general information, not advice on a specific transaction.