Vendor due diligence (VDD)

In vendor due diligence, it's not the buyer but the seller side — in insolvency, the administrator or supervisor — who commissions an accounting or law firm to review the target's finances, legal position, tax and sometimes commercial matters. The output is a report (fact book, often with a red-flag section) shared with interested bidders under NDA.

In insolvency, VDD is often commissioned as early as the SICHMASS phase or immediately after opening to speed up the bidding process — for going-concern sales with a tight timeline, there is often simply not enough time for each bidder to run its own buy-side review. The report is sometimes anonymised or aggregated to protect individual bidders' competitive position; reliance letters are commonly issued so bidders can rely on the findings without duplicating the cost themselves.

For buyers, VDD significantly shortens their own review effort but does not replace confirmatory due diligence on key risk areas — title, employment law (§ 613a BGB), tax, avoidance-claim exposure. The report is seller-commissioned and accordingly not neutral; experienced buyers treat it as a starting point, not a substitute for their own review.