Company Sale Process & Timeline

What owners do at each stage

Owners and management are most heavily involved at the beginning and end of a sale process. The middle of the process primarily consists of managing buyer interactions, which is handled by your M&A advisor or investment banker.

• Preparation. Share financial statements, tax returns, key contracts and operating information with your sell-side M&A advisor to facilitate drafting the confidential information memorandum and preparing for buyer due diligence. Expect several working sessions to agree goals, review adjusted EBITDA, discuss the company’s story, review and approve marketing materials and review and approve the buyer list.
• Marketing. While the M&A advisor is responsible for managing buyer outreach and communications during this phase of the process, management utilizes this time to prepare for management meetings and diligence that will occur in the next phase of the process.
• Diligence & Documentation. This is the most time intensive phase of the process. Your executive leadership team will meet with bidders to present your company’s story and answer bidder questions. You will need to answer diligence questions from the buyer, their lenders and their advisors. Commercial terms will be negotiated and a letter of intent will often be negotiated and signed. A binding purchase agreement will be negotiated by your attorney, which requires review and input from you and your advisors. Your executive leadership team will work with your counsel to prepare disclosure schedules as part of the purchase agreement. You may need to initiate steps to facilitate the transition from seller to buyer, such as obtaining releases or finalizing employment agreements.

Simultaneously to management helping progress the sale process, it is critical that the business continues to perform well. Buyers will pay close attention to financial and operating results through the course of the sale process until closing. Any decline in performance during the sale process can result in a reduction in purchase price and buyer interest.

What affects the timeline

Preparation is the factor owners control most. Businesses that are ready for buyer scrutiny before launch are best positioned to move faster and face fewer surprises in diligence. See how to prepare a business for sale.

Factors that tend to shorten a process:

• Three or more years of clean financial statements that tie to tax returns
• Adjusted EBITDA that is well documented and defensible
• Contracts, corporate records and employee information that is accessible and organized
• A leadership team that can run the business and answer buyer questions simultaneously

Factors that tend to lengthen a process:

• Declining financial performance over the course of the sale process
• Financial statements that need restating, or questionable add-backs that buyers dispute
• Negative surprises discovered in diligence such as legal, regulatory, licensing or environmental issues
• Owners or shareholders who are not aligned on price, terms or timing
• Changes in market conditions during the process

Confidentiality during the process

Confidentiality is of the utmost importance in any sale process to protect the seller’s customer, employee and supplier relationships, as well as competitive information. Confidentiality is protected by sharing information in stages, information is provided strictly on a need-to-know basis with the narrowest possible circulation. Your specific needs and concerns regarding confidentiality must be reflected in process strategy and decisions.

• Anonymous first contact. Buyers are provided an anonymized description of the acquisition opportunity on a no-names basis.
• NDA before details. Buyers must sign a binding non-disclosure agreement before they receive the CIM or receive confidential information.
• An agreed buyer list. You approve who is contacted. Competitors or other sensitive parties can be excluded, or approached with incremental safeguards.
• Sensitive data held back. Customer names, pricing, employee details and similar highly sensitive information is typically withheld or anonymized until the final stages, and shared with fewer parties.
• Controlled data room access. Diligence documents are shared through a virtual data room, which controls what information is shared with each party and records what information each party accesses.
• Discreet meetings. Management meetings can be held off-site or outside normal working hours.

We can advise you regarding when and how to communicate the sale to employees and customers. Many owners bring a small number of key managers into the process early, to the extent their input will be needed to facilitate the sale process, and tell the wider team closer to or at closing. Buyers are prohibited from contacting customers or employees via the non-disclosure agreement, however in some circumstances buyers may request calls with key customers as late-stage confirmatory diligence, with your agreement.