Most owners go through a business sale once. The process takes six to twelve months and involves phases most people have never seen up close. Here is what actually happens.
Phase 1: Preparation
Before anything goes to market, your advisor prepares three things: a normalized financial analysis that reflects what the business is actually worth to a buyer, a Confidential Information Memorandum covering operations, financials, and the opportunity for an acquirer, and a Virtual Data Room where all supporting documents are organized under NDA. This typically takes four to eight weeks. How well you prepare here affects everything that follows.
Phase 2: Buyer Outreach
Outreach is targeted, not broad. Buyers sign NDAs before receiving any identifying information. The list typically includes strategic acquirers, private equity firms, and occasionally family offices. The goal is competitive interest from buyers who have a genuine reason to acquire your business, not a long list of names.
Phase 3: Indications of Interest
Buyers who want to proceed after reviewing the CIM submit an Indication of Interest. An IOI is non-binding and reflects their price and proposed terms at this stage. Multiple IOIs give you leverage. A single-buyer process does not.
Phase 4: The Letter of Intent
After selecting a preferred buyer, you negotiate and sign the Letter of Intent. Most of the LOI is non-binding. Two provisions are not: the exclusivity clause, which stops you from talking to other buyers, and the no-shop clause, which prevents you from soliciting new ones. Exclusivity periods typically run 45 to 90 days. Once signed, your negotiating position changes. Push for the shortest period you can get.
Phase 5: Due Diligence
Diligence is the buyer’s process of verifying what you have told them, covering financials, legal, operations, customers, contracts, employees, and tax. It runs six to ten weeks and is the most demanding part of the process for a seller. Price adjustments often surface here. Some are legitimate findings. Others are attempts to chip the number now that exclusivity is in place. Your advisor’s job is to tell the difference.
Phase 6: Closing and After
When diligence is done and the purchase agreement is signed, funds transfer and ownership changes. For most sellers, it does not end there. Transition obligations, earn-out terms, and representations and warranties that survive closing for 12 to 24 months all continue past the closing date. Knowing this in advance lets you negotiate the terms that govern it.
Every deal has complications that the framework above does not capture. What keeps a transaction on track is working with advisors who have been through those situations before.
If you are thinking about a sale in the next one to three years, book a confidential call with our partners: paladinpartners.ca/contact