How It Works

The Business Sale Process

According to a survey by Pepperdine University, the process of closing a business sale transaction averages between 7 and 12 months. Understanding each stage helps you prepare for a successful outcome.

The process of selling a company is very time consuming. You should run your business as if you are always preparing for its sale. Many business owners find the process of preparing to sell the business helpful in many ways — even if they decide the timing is not right. By doing so, the business owner is paying attention to the important aspects of the business that directly drive value and eventual marketability.

Initial Consultation

There is an initial meeting between the business owner and intermediary/business broker. In the meeting, the intermediary will want to learn about the business, the reason for considering selling, and educate the owner about the sale process. It is also important to understand if the owner is really prepared for a sale, has a plan about what happens afterwards, and is emotionally ready to give control of the business to another person.

Opinion of Value / Business Valuation

A very important first step includes a conversation on how much the business might be worth. The next step is often for the intermediary to provide an Opinion of Value or have a full Business Valuation completed. Arnie has provided hundreds of valuation reports to business owners during his 23 years of selling businesses.

Engagement & Prospectus Preparation

If the business owner is ready to move forward and there is an agreed-upon value expectation and asking price, an engagement letter is signed. After formally engaging, a prospectus or confidential business review is prepared by the broker and approved by the owner. This document is designed to answer most of the questions that potential buyers will have and generally takes several days to complete.

Confidential Marketing

With the prospectus completed and the marketing plan in place, the marketing process starts. Without compromising confidentiality, information about the business is posted on Business Brokerage and M&A sites and marketed to an existing database of qualified buyers. Where appropriate, Arnie contacts potential strategic buyers, Private Equity Groups, and Family Offices — all in a highly confidential manner. Specific buyers can be filtered out at the seller's request.

Buyer Qualification & Meetings

For many businesses, interest from potential buyers begins within weeks. One of the biggest services provided by M&A Intermediaries is identifying high-potential buyers. Before a prospective buyer meets the business owner, there are often several calls and meetings with the intermediary. Only financially qualified buyers are brought forward. Typically, there is at least one initial in-person meeting or conference call between the potential buyer and seller.

Offer, Due Diligence & Closing

If the potential buyer wants to make an offer, they submit a letter of intent covering the offering price, terms of payment, contingencies, and exclusivity. The process then moves to due diligence, financing, and contract preparation — which can take 2 to 3 months when bank financing is involved. The three main contingencies are financing, satisfactory books & records review, and license or lease transfers. Once due diligence is completed, Arnie gets buyers to sign a contingency release which protects the seller, and the transaction proceeds to closing.

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