Where a business needs permission to operate, the buyer needs to know that the permission is real, current, and capable of surviving a change of ownership. Regulatory diligence is that check, and in some trades it decides who is able to buy at all.
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The checklist
Every license, permit, registration and accreditation the business holds, with issuing authority, expiry and renewal terms. Whether each transfers, must be reapplied for, or lapses on a change of control. Inspection and audit history. Any enforcement action, conditions or undertakings. And the personal qualifications of the individuals the licenses depend on, which in many trades is the owner.
Which trades attract it
Healthcare, financial services, food, alcohol, transport, construction, childcare, environmental services and anything with a professional license. In several of them ownership itself is restricted, which narrows the buyer pool before price is even discussed. Knowing that before marketing changes who you approach.
How it affects the timetable
License transfers and new applications run on the authority's clock, not the parties'. Where a license must be applied for afresh, the closing may be conditional on it, or the parties may use an interim arrangement. Either way it belongs in the letter of intent, because discovering it later can add months.
Questions people ask about regulatory due diligence checklist
Do licenses transfer with the business?
It depends on the license and the structure. In a share sale the entity often keeps them; in an asset sale many must be reapplied for by the buyer.
What if the license is personal to me?
The buyer needs their own qualified person, or a written commitment from you for a transition period. This is a common cause of delay in trades.
Does an enforcement history kill a deal?
Rarely if disclosed and resolved. Discovered enforcement history is treated as a signal about everything else you said.