When preparing to sell, owners always ask the same two questions: what is involved, and how long will it take? Being knowledgeable about the phases of a sale helps owners understand what to expect and what is expected of them at each stage. Experience has taught us there are natural breakpoints in a transaction, so rather than give a pat answer, we look at the process in four distinct phases.
Phase I · Diligence and Preparation
Gather key documents and data, prepare a valuation, build an Information Memorandum and a no-name teaser to market the company, develop a marketing strategy, and research potential buyers. This phase also includes preparing a Quality of Earnings, simplifying and crafting the company's story, determining the type of buyer being sought, and developing the buyer list. There is a lot of preparation in this prequel phase. It can feel like a slog, and momentum is hard to generate, but the payoff is worth it. Typically about two months.
Phase II · Marketing
Make initial contact with prospective buyers, distribute teasers and non-disclosure agreements, send the Information Memorandum to buyers who sign the NDA, answer their questions, request Indications of Interest, and invite select candidates to a management presentation. Marketing materials should tell a compelling story and be impeccably organized, which raises a buyer's confidence and supports a higher valuation. Typically about two months, though it can compress if an eager buyer offers a premium to preempt the process.
Phase III · Management Presentation
The owner and management team present the company face to face to the buyer candidates who submitted an acceptable IOI, usually three or more, to create a basis for comparison. The goal is to build excitement, encourage buyers to submit at the high end of their range, and give the owner a chance to assess fit, including whether they could work with and for the buyer if they stay on. Afterward, candidates submit Letters of Intent, which the owner and advisors evaluate and negotiate, ultimately executing one. Typically about two months.
Phase IV · Buyer Due Diligence and Documentation
The buyer undertakes a thorough review, corporate, financial and tax, customer, vendor, contracts, employees, benefit plans, insurance, IT, and environmental, to confirm the information provided and surface any latent issues. Running alongside diligence is documentation: the purchase agreement plus related agreements such as employment agreements, leases, and incentive plans. A virtual data room can speed the review. This is where the seller works hardest, feeling the second-job pressure of running the company while orchestrating the sale, and in some industries the timeline runs longer due to regulatory approvals. Typically about three months, and often the longest phase.
Like building a house, selling a company is a series of stages that build on one another. Just as a builder hangs drywall before painting, owners must complete preparation and marketing before negotiating and closing. Done right, each phase lays a solid foundation for the next.
Understanding the four phases helps owners understand and manage expectations and the complexities of each stage. A thoughtful, organized approach sustains momentum from beginning to end, and leads to a successful transaction that meets the seller's goals.
← Back to all insights