Key takeaways:
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Phase 1 (Weeks 1–3/6): Preparation, Valuation, and Deal Materials
This first phase usually takes 3–6 weeks. It’s where we build the foundation for everything that follows.
What happens in this phase
- Kickoff + strategy calls: Align on goals (price, timeline, legacy, post-close plans) and clarify what an ideal buyer looks like.
- Data collection: Gather key financial and operational information so we can tell a clean, compelling story.
- Marketing materials: Create a teaser and a more detailed marketing brochure (often a CIM) for qualified buyers.
- Secure data room setup: Build a controlled, confidential space for documents—organized for buyer review.
- Financial normalization (when needed): Build a recast/adjusted view of earnings so the financials reflect how buyers underwrite the business (often removing one-time items or non-operating expenses).
Why it matters: A strong Phase 1 reduces friction later. Most value leaks happen when the story is unclear, documents are messy, or financials don’t hold up under buyer scrutiny.
Phase 2 (Months 2–3): Buyer Outreach and Market Process
Phase 2 typically runs through months 2–3 and focuses on generating buyer demand.
What happens in this phase
- Target buyer list build: Identify strategic and financial buyers that match the business and your goals.
- Outreach and qualification: Contact buyers, manage NDAs, and share materials only with qualified parties.
- Market positioning: Highlight what buyers care about most—growth, defensibility, customer quality, margins, leadership structure, and scalability.
- Leveraging relationships + research: Use both networks and research to find the strongest-fit buyers—not just the obvious ones.
Buyer types you’ll typically see
- Strategic buyers (often pay more when there are synergies)
- Financial buyers (private equity, family offices, independent sponsors, and experienced acquirers)
Goal of Phase 2: Create competitive tension and bring multiple serious buyers to the table.
Phase 3 (Months 4–5): Offers, Shortlist, and LOI Negotiation
Phase 3 usually lands in months 4–5 and is where the deal starts to feel “real.”
What happens in this phase
- Indications of Interest (IOIs) / early offers: Buyers signal valuation range and proposed terms.
- Shortlist the best 3–5 buyers: Focus on the buyers most likely to close at the best overall outcome—not just the highest headline number.
- Management calls + site visits: Buyers deepen their understanding of operations, team, and growth drivers.
- Term negotiation: Negotiate key economics and terms, then work toward a signed Letter of Intent (LOI).
- Exclusivity begins: LOIs typically include an exclusivity period where the chosen buyer conducts deeper diligence.
Goal of Phase 3: Secure the best LOI—price and terms—so the deal doesn’t unravel later.
Phase 4 (Months 6–8+): Due Diligence, Definitive Agreements, and Closing
Phase 4 is commonly months 6–8, though it can start earlier if a buyer moves quickly (or later if diligence is heavy).
What happens in this phase
- Buyer diligence: Deep review of financials, operations, customers, contracts, legal, HR, and risk.
- Quality of Earnings (QoE): Many deals include a QoE review to validate earnings and working capital assumptions.
- Definitive documents: Attorneys draft and negotiate the Purchase Agreement and supporting documents.
- Deal structure details: Navigate items like working capital targets, representations & warranties, indemnities, escrows/holdbacks, earnouts, and other closing mechanics.
- Seller-side documents (as applicable): Review seller notes/promissory notes and employment or consulting agreements if you’re staying involved post-close.
- Closing coordination: Work alongside your M&A attorney and the buyer’s team, including banking and funding logistics, to reach the finish line.
Goal of Phase 4: Protect value and get to a clean close—with as little surprise as possible.
Plan Backward From Your Ideal Exit Date
If you have a target date (retirement, family milestone, relocation, etc.), plan backward. If you want to close around a specific life event, you generally want to start the process at least 6–9 months prior—and often earlier if the business needs cleanup, documentation, or operational improvements before going to market.
Rule of thumb: The earlier you start preparing—and the more buyer-ready the business is—the more leverage you maintain during the sale.
Ready to Understand What Your Business Could Sell For?
If you’re considering a sale in the next 12–24 months, the best starting point is clarity—what the business is worth today, what drives value, and what would increase it before going to market.
Schedule a free business valuation discussion to get an honest take on buyer appetite, valuation range, and what to tighten up before you go to market.
Frequently Asked Questions About Selling Your Business
How long does it typically take to sell a business?
Many transactions close in 6–8 months, but timelines vary based on deal complexity, buyer diligence requirements, industry, and how prepared the business is going into market.
What can slow down the M&A process the most?
The biggest delays usually come from incomplete documentation, unclear financials, customer or revenue concentration concerns, and disorganization during due diligence. A strong Phase 1 helps prevent most of these issues.
What’s the difference between an IOI and an LOI?
An IOI is typically an early, non-binding expression of interest that signals range and intent. An LOI is a more formal (still largely non-binding) document that outlines key economic and deal terms and often includes exclusivity.
Do I need a Quality of Earnings (QoE) report?
Not every deal requires a QoE, but it’s common in private equity and larger transactions. QoE helps validate earnings, working capital assumptions, and the sustainability of cash flow.
When should I start preparing if I want to sell next year?
Ideally, start 9–18 months before your target close date. That gives you time to clean up financials, reduce risk factors, strengthen your management story, and enter market from a position of leverage.
