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Following these steps in advance can save a significant amount of time and effort during any transaction.

Preparing for transition

Helpful Steps to Consider When Selling Your Business

  • 8/29/2013

Update 12/1/14: This article was updated to include the role of mergers and acquisitions (M&A) advisory.

Preparing for a potential sale of your company is an important part of a successful transaction that can save time and help achieve a premium valuation. Having strong books and records, a realistic perspective of valuation and marketability, and a great group of advisors can contribute to a smoother transaction process and favorable outcome. A sense of humor can help, too.

Here are few steps to get you going on this exciting journey.

Select your group of advisors

Your group of advisors could include your ownership group, other key stakeholders, a corporate attorney, accountant, mergers and acquisitions (M&A) advisor, and wealth advisor. Be sure that your team has experience with change-of-control transactions. The accountant or attorney who has provided you with operational service in past years may not always be the best suited to help you navigate through a transaction without assistance. Make sure you have good rapport with the individuals that will be alongside you in the process – after all, you will be spending a lot of time together on your journey.

Gather evidence on the potential valuation of your company

This can be done by conducting market studies, analyzing comparable company research, hiring a valuation firm, or meeting with individuals who spend time in the transaction world (M&A advisors, accountants, lawyers, private equity professionals, etc.). Market value is simply what another party is willing to pay for your business. However, there are likely data points and comparables readily available that can help you understand and potentially estimate your company’s market value today. Keep in mind that at the end of the day, a well-run process is one of the best ways to help achieve or exceed valuations implied by various sources when you bring your company to market.

Gather your key documents for review

It’s no secret that there are a number of documents that will be requested and scrutinized during a potential transaction. Get a jump-start on these requests by having the following documents available (and properly signed/executed) in advance. Having key documents readily available will not only help ensure interaction with buyers maintains the right momentum, but will also create a perception of a well-organized process.

Key Documents to Gather Ahead of a Sale
Capitalization table including detailed list of ownership (shares, options, warrants, and preferences) on a fully diluted basis
Current organization chart
Articles of incorporation, by-laws and board meeting minutes
Loan agreements, including cross-collateralization commitments from related parties
Lease agreements
Product catalogs and price lists, as applicable
List of major customers, within concentration analysis
Confirm you have fully-executed versions of major contracts with customers and suppliers, and determine which have consent or other rights that may become relevant in a sale
List of major competitors and analysis of how you effectively compete against them
List of employees with salary and job description, as well as potential obligations to any employee (e.g., bonuses, long-term incentives, etc.)
Federal, state, and payroll tax returns for the last five years
Internal financial statements for the last five years
Audited or reviewed financial statements with management letter comments (as available) for the last five years
Internal operations reports for the last 12 months
Monthly projections for the next 12 to 24 months, with annual plan for three or more years
Analysis of one-time or unusual events over the past three years, if any, and financial impact each has had on the company’s performance
Summary of backlog with expectations on the likelihood of closing
Current business/strategic plan
Confirm all necessary permits are in place and up to date

Set up a document sharing platform

There will be a number of large documents sent to various parties throughout the months of due diligence and buyer discussions. Set up a shared documentation site or virtual data room (VDR) to coordinate a secure process.

Cloud-based VDRs are accessible for monthly contracts; many of them start at less than $100 a month. They provide secure online “cabinets” that multiple users can access (with tracking and reporting back to you) when needed. If you don’t feel a VDR is necessary, create a shared folder that can be accessed by the appropriate team on your network drive. Consult with your M&A advisor and/or legal counsel to confirm this is done efficiently and does not have to be replicated as discussions with buyers advance.

Pre-review documents to avoid delays

Ask members of your transaction advisory team to perform a pre-review of information. Deals can stall or experience significant reductions in purchase price due to financial information that is challenged and needs to be modified. An experienced team can identify key issues well in advance to help you avoid this scenario.


Be sure that all historical financial data is reliable and future projections are reasonable and achievable. If timing allows, consider having an audit performed for at least the last year by a respected accounting firm. This investment will most likely identify common weaknesses in financial reporting and controls that can be mitigated before a transaction occurs.

Profitability can be understated or overstated erroneously, so be sure that you have a solid team assisting you. Further, consider commissioning a sell-side Quality of Earnings report to help identify early on issues that my later be raised by buyers. Knowing how to position each, and getting them “out on the table” early, can help preserve significant purchase price in negotiations with buyers.


It is important that all legal structures are in order and confirmed ownership is documented. Be sure you have support from all minority partners, the board of directors and potentially your financial institution to the extent required. Employee matters should also be well-documented.

Determine which employees (if any) should be aware of the pending sale

Many times making arrangements for key employees to stay on through an ownership transition is seen as a key component to the success of the deal. If the retirement of these employees/owners is imminent, consider the impact it may have on the organization going forward and communicate that plan to potential buyers. Also, determine which employees may be instrumental in getting a deal completed, and consider putting in place certain incentives to obtain their full cooperation and attention through the sale process.

Following these steps can save a significant amount of time, effort, and purchase price during any transaction. Purchase price and terms can change significantly from the time a letter of intent is signed through to the signing of a purchase agreement. As a seller, you can minimize these differences by being prepared and surrounding yourself with the best team possible.

Begin thinking about your options after the sale

What will you do with the proceeds from the sale of your business? Working with the right wealth advisor, someone who can be part of your broader transaction advisory team, may help you better understand your options after the liquidity event. Some of your aspirations may require advance planning, so consider putting together a goals-based plan with a wealth advisor well before the transaction date. Remember, once the sale of your business becomes public knowledge, you may be bombarded with calls from financial services firms. A wealth advisor who understands your unique goals can help you make objective, rather than emotional decisions.