Guide context
Understand the mechanics before the negotiation starts
Core transaction concepts matter because they often determine how headline value converts into real economics for shareholders. Buyers, lenders, and counsel may use the same term differently depending on structure, timing, and diligence findings.
Use this guide to clarify the commercial issue before a process becomes time-sensitive. The right interpretation depends on company size, sector, geography, financial profile, buyer universe, and the leverage available when terms are negotiated.
Before a term is accepted, shareholders should ask how it will be measured, who controls the calculation, what information supports it, and whether the answer can change between signing and closing.
This concept is often evaluated alongside What is a CIM?, What is a Letter of Intent (LOI)?, and Quality of Earnings Report. because value, diligence, structure, and closing certainty are usually connected.
Phase 1: Preparation (4–8 weeks)
The preparation phase is where the foundation of a strong outcome is laid. It involves: selecting and engaging your M&A advisor; conducting a thorough financial analysis and preparing a normalised EBITDA schedule; commissioning a sell-side QoE if appropriate; identifying and prioritising the buyer universe; preparing the Confidential Information Memorandum (CIM) and financial model; and developing the management presentation. Well-prepared sellers run faster processes, face fewer diligence surprises, and achieve better outcomes. Cutting corners in preparation to go to market faster almost always costs more than it saves.
Phase 2: Marketing (4–8 weeks)
The marketing phase involves targeted outreach to qualified buyers, managing the NDA process, distributing the teaser (a short anonymous document about the business), and providing the CIM and financial model to parties who sign NDAs and express serious interest. Qualified buyers are invited to submit Indications of Interest (IOIs), which set out their preliminary valuation and deal structure thinking. The marketing phase is where competitive tension is created — the goal is to have multiple qualified buyers engaged simultaneously, which is the mechanism that drives price.
Phase 3: Management presentations and final bids (4–8 weeks)
Management presentations are meetings between the seller's management team and serious buyer candidates. They provide an opportunity to present the business in depth, answer buyer questions, and — critically — assess buyer fit beyond just price. After management presentations, buyers are invited to submit formal bids (Indications of Interest or Letters of Intent). The process of evaluating bids, selecting the preferred buyer, and negotiating the LOI is the highest-leverage period in any sale process. The advisor's role here — maintaining competitive tension, managing buyer communications, and negotiating terms — is where value is most directly created or destroyed.
Phase 4: Exclusivity and due diligence (6–12 weeks)
After the LOI is signed and exclusivity is granted, the buyer commences formal due diligence — financial, legal, commercial, technical, and tax. This is the most intensive period of the process for management, who must support the diligence process while continuing to run the business. The data room — a secure, organised repository of all relevant business documents — must be prepared in advance. Well-prepared data rooms accelerate diligence; poorly prepared rooms extend it and create opportunities for buyers to surface issues. The QoE, legal review, and commercial diligence proceed simultaneously during this period.
Phase 5: Documentation and closing (6–12 weeks)
Once due diligence is substantially complete, legal documentation begins in earnest. The Share Purchase Agreement (SPA) — the principal legal document of the transaction — is negotiated between the parties' lawyers. Key SPA terms include the representations and warranties, indemnification provisions, conditions to closing, and any closing adjustments. Final working capital and net debt calculations are performed at closing. Regulatory filings (HSR in the US, merger control in Europe) are made if required. Closing typically occurs within days of all conditions being satisfied — at which point funds flow to the seller.
Questions to resolve
Turn the concept into a decision
The practical value of this guide is highest when the concept is tested against the company's facts, shareholder objectives, counterparty universe, and timing. Before relying on the analysis in a live transaction discussion, owners and boards should resolve the following questions.
- What company-specific facts support the guidance in "Phase 1: Preparation (4–8 weeks)", and what documents or adviser input would make that answer credible to buyers, lenders, investors, or a board?
- What company-specific facts support the guidance in "Phase 2: Marketing (4–8 weeks)", and what documents or adviser input would make that answer credible to buyers, lenders, investors, or a board?
- What company-specific facts support the guidance in "Phase 3: Management presentations and final bids (4–8 weeks)", and what documents or adviser input would make that answer credible to buyers, lenders, investors, or a board?
- How does this topic interact with What is a CIM? and What is a Letter of Intent (LOI)?, and would those related issues change valuation, proceeds, structure, timing, or closing certainty?