Buying or selling a business is one of the most significant milestones an entrepreneur will face. Whether the goal is succession, liquidity, growth, or simply moving on, the M&A process forces owners to take a deep and honest look at their business. And while no two deals are identical, the overall structure of a transaction tends to follow a predictable path: confidentiality, preliminary discussions, a letter of intent, due diligence, negotiation of the definitive agreements, closing, and then post-closing obligations. Understanding this roadmap can greatly reduce stress and improve outcomes.
Many owners go into the process believing they can figure it out along the way, but professionals in this space know the opposite is true. Preparation is what prevents surprises, protects value, and keeps momentum.
Getting Ready To Sell
One of the earliest and most repeated points made by advisors is that owners must begin preparing long before they formally launch a sale. “Don’t wait till you’re thirsty to drill your well,” advises Allan Grafman of All Media Ventures.
Preparing early means dealing with issues that would raise eyebrows or trigger follow-up questions from any sophisticated buyer. These include messy financials, missing corporate records, outdated contracts, unassigned intellectual property, related-party transactions, or the classic family-business issues, such as relatives on payroll or personal expenses run through the company. Cleaning these up early avoids uncomfortable conversations later and removes friction when buyers dig into the details.
Early preparation also means clarifying the owner’s goals and ensuring expectations align with market reality. An owner who expects a premium valuation must understand what drives that valuation and whether their business matches those expectations.
Assembling the Deal Team
An effective deal team typically includes an M&A attorney, an accountant familiar with transaction-level diligence, a tax advisor, and often an investment banker. Together, they help organize the process, protect the seller’s interests, and maintain momentum.
- The attorney coordinates the legal structure, drafts documents, and helps manage risk allocation.
- The accountant supports the quality-of-earnings process, ensures financial information is accurate, and prepares the seller for the scrutiny to come.
- The investment banker shapes the narrative, manages buyer outreach, runs a structured process, and helps maximize value.
When these professionals work cohesively, the owner benefits from consistent messaging and stronger negotiation leverage.
Key Considerations in the Sale Process
Confidentiality First
Before any meaningful documents or financial information are shared, the parties must sign a non-disclosure agreement (NDA). The NDA governs how sensitive information may be used, ensures that only approved individuals can access it, and often includes critical protections such as employee non-solicitation provisions. Naming a single ‘conduit’ through whom buyer inquiries must flow will give the seller better control over what information is shared and when.
According to Robert Londin of Jaspan Schlesinger Narendran LLP, many sellers often forget to include non-solicitation provisions in the NDA. This is a critical oversight as prospective buyers may learn the identities, roles, and compensation of key employees through the process. That information could otherwise tempt a buyer to recruit staff if the deal does not close.
The Virtual Data Room
After an NDA is in place, the seller will populate what is referred to as a ‘virtual data room,’ which is a secure online portal that houses corporate documents, financial statements, tax returns, contracts, policies, intellectual property records, regulatory materials, and more. A well-organized data room signals professionalism and reduces delays.
Today’s virtual data rooms are very sophisticated, offering multiple layers of confidentiality. Some documents will require additional approvals or even separate confidentiality acknowledgments before access is granted. This structure protects the seller and ensures sensitive information is shared thoughtfully and strategically.
Quality of Earnings Report
In nearly all mid-market transactions, a Quality of Earnings report is an essential component of the virtual data room. According to Bob Dekker of The Peakstone Group, firms won’t consider taking a deal to market without one.
This independent analysis evaluates the sustainability of earnings, identifies non-recurring items, and normalizes expenses. For example, it may adjust for excess owner compensation, personal expenses run through the business, or one-time charges.
Buyers also rely heavily on these reports when assessing valuation and negotiating deal terms. A well-prepared seller uses this reporting process to proactively identify issues rather than wait for the buyer to uncover them.
Phil Buffington of Balch & Bingham LLP points out that sellers often believe they have everything in the data room, only to realize near closing that critical vendor agreements or litigation documents are missing. Because buyers will request these items eventually, it is important to ensure they are placed in the data room at the outset. Delays can create unnecessary tension and invite renegotiation.
The Letter of Intent
After preliminary review and initial conversations, the buyer will issue a letter of intent (LOI). Although usually non-binding, the LOI outlines key economic terms, including purchase price, structure, timing, exclusivity, and closing conditions. It creates alignment and provides a roadmap before parties expend significant time and money drafting a comprehensive purchase agreement. Without this alignment, drafting the definitive agreements becomes inefficient and expensive. The LOI also helps buyers secure internal approvals from lenders, boards, or investors.
Due Diligence
Once the LOI is signed, formal diligence begins. Buyers thoroughly examine financial statements, tax filings, corporate governance, customer concentration, litigation history, regulatory compliance, intellectual property, employment matters, leases, data security practices, and more.
Family-owned businesses are often surprised by how far diligence goes. Londin notes that buyers will not ignore issues like multiple family members on payroll, personal expenses, or aggressive accounting choices. These items can reduce valuation, create escrow requirements, or generate concerns about management practices.
Negotiations and Closing
The purchase agreement is the centerpiece of the entire transaction. By the time the parties reach drafting, the broad economic terms are usually set, but the details, where most of the risk lives, still require substantial negotiation. A well-structured purchase agreement allocates risk between buyer and seller, defines each party’s obligations, and creates a roadmap for the final steps toward closing.
At its core, the purchase agreement combines several major components, including.
- Purchase price and payment terms
- Representations and warranties
- Indemnification provisions
- Covenants
- Working-capital adjustments
- Closing conditions
In addition to the core agreement, the parties prepare a suite of ancillary documents that support the transfer of the business. These may include:
- Bills of sale or assignment agreements transferring specific assets.
- Stock transfer documents in equity deals.
- Escrow agreements establishing holdback funds.
- Corporate resolutions authorizing the deal.
- Third-party consents, such as landlord approvals, vendor consents, or lender permissions.
- Disclosure schedules listing exceptions to the seller’s representations.
Ultimately, negotiating the purchase agreement is about managing risk. Buyers want certainty about what they are acquiring; sellers want predictability about their future liability. The more organized and transparent the seller has been throughout the process, especially in the data room, the smoother the final negotiation tends to be.
Once all conditions are met, including financing, consents, and final diligence, the deal moves to closing. Funds are transferred, ownership changes hands, and the parties execute final documents. Yet many obligations continue after closing. Post-closing items may include working-capital adjustments, escrow releases, earn-out calculations, customer notifications, and employee transition matters. Integration is often one of the most challenging phases, requiring operational alignment, cultural adjustment, and careful communication.
The Importance of Process Fundamentals
The M&A process may appear linear on paper, but in practice, it is a carefully choreographed combination of preparation, timing, and disciplined execution. While every deal has its unique twists, the core principles discussed here apply universally to business owners preparing for a sale. In short, successful sellers approach the M&A process as a disciplined project, not a one-time event. With planning, organization, and the right advisors, business owners can navigate the complexities confidently and maximize both value and certainty.
This article was originally published on November 25, 2025, here.