How to Sell Your Company: A Founder's 90-Day Prep Playbook
Selling a company is the most consequential transaction most founders ever run, and most founders run it badly. Not because they make catastrophic mistakes, but because they treat the process as a financial exercise rather than a strategic one. The price comes out lower than it should, the deal terms favor the buyer in ways the seller never recovers from, and the post-closing period creates friction that erodes whatever value the headline number represented.
The difference between a good outcome and a mediocre one is usually decided in the ninety days before any banker is hired or any buyer is approached. Founders who use that window well enter the process with leverage, optionality, and a clear view of what they are actually selling. Founders who skip it spend the next twelve months absorbing decisions that are no longer reversible.
This article is the playbook we walk founders through when they are early in considering a sale. It is not a comprehensive M&A treatise. It is the prep work that determines whether the rest of the process goes well.
Topics covered:
Before You Start: The Decisions That Set the Outcome
The Pre-Sale Preparation Window
Bankers, Brokers, and Whether You Need One
Building the Buyer Universe
The Confidential Information Memorandum and First-Round Indications
Letters of Intent: Where Sellers Concede Too Much, Too Early
Due Diligence and the Definitive Agreement
Closing, Earnouts, and the Post-Closing Period
Conclusion
1. Before You Start: The Decisions That Set the Outcome
Three decisions are made before the formal process begins, and each of them determines a meaningful share of the eventual outcome.
The first is what you are actually selling. A 100% equity sale is a different transaction from a recapitalization, which is different from a divisional carve-out, which is different from an asset sale. Each structure has its own tax profile, its own buyer universe, and its own deal timeline. Founders who walk into the process with a fixed view that "we are selling the company" without considering the alternatives often discover at LOI stage that a recap or a partial sale would have produced a better outcome at lower risk.
The second is what counts as a successful outcome. Price is the obvious one, but it is rarely the only consideration that matters in the long run. Closing certainty, deal structure, post-closing obligations, retention of key employees, the cultural fit between the buyer and the team, and the timeline to a second exit (if there is rollover equity) all influence whether the seller ends up satisfied two years after the transaction closes. Define what success looks like before you are negotiating with someone who has more information about you than you have about them.
The third is timing. The market matters. Comparable transactions matter. The macro environment matters. Within the seller's own business, the trailing twelve months of financial performance matter, and so does the projected next twelve months. The right time to sell is not when the founder is ready to be done. The right time is when the business is performing in a way that supports the price the founder wants.
Get these three decisions right before you call a banker, and the rest of the process is meaningfully easier. Get them wrong, and you are selling into a process that was set up to produce a worse result than was available.
2. The Pre-Sale Preparation Window
Most founders underestimate how much time the preparation window deserves. Ninety days is the floor. Six months is more typical for a well-prepared sale.
The work falls into five categories.
Financial cleanup. The buyer will run a quality of earnings analysis on your financials, and the QofE will surface every accounting inconsistency, every revenue recognition question, every cost classification that differs from GAAP, and every related-party transaction. Find these before the buyer's accountants do. Run a sell-side QofE if the deal size warrants it. Reconcile your management financials to your audited financials and document any differences. Address inventory reserves, receivables aging, and accrual practices so that the closing balance sheet does not produce a downward purchase price adjustment that nobody saw coming.
Corporate cleanup. Confirm the cap table. Confirm that all stock and option grants are properly documented. Resolve any historical equity issuances that were not fully papered. Review your IP assignments and confirm that everything the company uses is owned by the company. Confirm that customer and vendor contracts have been signed by appropriate authority and that change-of-control provisions are inventoried. Resolve any outstanding regulatory or compliance matters. Founders are routinely surprised by how much corporate housekeeping has accumulated over the years, and every unresolved item becomes a diligence issue that the buyer will use to negotiate down on price.
Customer concentration analysis. The buyer will price the business in part based on the durability of its revenue. If the top three customers represent more than 30% of revenue, the buyer will discount accordingly. If a single customer represents more than 20%, the buyer will demand a customer-specific carve-out in the indemnity package or an earnout tied to that customer's retention. Understand your concentration before the buyer raises it, and have a narrative ready for why the concentration is durable.
Management team alignment. The buyer is buying the business and, in many transactions, the team that runs it. If a key member of the team is going to leave at closing, the buyer needs to know that early and price it in. If a key member is going to stay, the buyer will want to negotiate retention compensation and non-competes. Founders who walk into the process without alignment among their senior leadership are setting up a process where the buyer can play the team against each other.
Data room. By the time you launch the process, the data room should be substantially complete. Not a folder of files dumped in last week, but an organized, indexed repository that lets a buyer's diligence team move efficiently through the standard categories. The data room is the first thing the buyer sees of how the company operates. A messy or incomplete data room is interpreted as a sign that the rest of the business is messy too, and it costs you in price.
3. Bankers, Brokers, and Whether You Need One
The default assumption is that any company being sold for more than $25 to $50 million should retain an investment banker, and that smaller deals can be handled directly by counsel and the seller's senior team.
That assumption is mostly correct, but the framing is wrong. The right question is not "does the deal size warrant a banker." The right question is "does the seller have access to the buyer universe, the negotiating leverage, and the bandwidth to run a real process without one." If the answer to any of those is no, hire the banker, regardless of deal size.
What a good banker delivers is access, structure, and negotiation pressure. Access means a real list of qualified buyers, both strategic and financial, with current relationships and current pricing intelligence. Structure means a controlled process with defined phases, deadlines, and competitive tension. Negotiation pressure means the buyer believes there are credible alternatives, which is the single most important determinant of price.
What a banker does not deliver is a substitute for the seller's own preparation. A banker can run a process. A banker cannot fix a business that is not ready to be sold, cannot reconstruct a cap table, and cannot resolve management team misalignment. The pre-sale preparation work is the seller's job and the seller's counsel's job, regardless of whether a banker is engaged.
If you do hire a banker, hire one whose recent track record matches your deal profile. A banker who closed three $20 million SaaS deals in the last twelve months is more useful for a $25 million SaaS sale than a banker who closed a $400 million industrial deal. Reference-check on three closed deals, not on the firm's polished pitch deck. And negotiate the engagement letter carefully. The success fee, the tail period, the lockup on parallel processes, and the definition of what counts as a "transaction" for fee purposes are all more contestable than most founders realize.
4. Building the Buyer Universe
The buyer universe falls into three categories.
Strategic buyers are operating companies that would acquire your business for synergistic reasons: revenue synergies, cost synergies, geographic expansion, product extension, or competitive consolidation. Strategics generally pay the highest prices when there is a real strategic fit, because they are pricing the deal off post-synergy economics rather than the standalone business. They also tend to move slowly, run more political diligence processes, and integrate aggressively post-closing, which can be jarring for the founder and the team.
Financial buyers are private equity firms, family offices, search funds, and other capital sources that acquire businesses for financial returns. Financial buyers tend to pay disciplined prices based on standalone EBITDA and growth, but they move quickly, run more efficient diligence processes, and often offer the founder rollover equity and a continuing role. For founders who want a second exit and are open to staying on through a hold period, financial buyers can be the better counterparty.
Hybrid buyers are sponsor-backed strategics: portfolio companies of private equity firms that acquire add-on businesses to build platforms. These buyers can offer the strategic premium of a synergistic transaction with the speed of a financial process, and they have become a meaningful share of the middle-market buyer universe over the last decade.
A well-run process targets both strategic and financial buyers. Excluding either category limits the leverage the seller has at LOI stage, and it materially increases the risk of a single buyer dominating the negotiation. The banker, if engaged, runs the strategic outreach. The seller and counsel typically know the universe of likely financial buyers from prior interactions and from sector relationships.
The list should be tiered. Tier one is the most likely strategic and financial buyers, who get early access to the CIM and management presentations. Tier two is the next layer, who are introduced to the process if tier one does not produce sufficient competitive tension. Tier three is the broader universe, contacted only if the process needs to be widened. Running the process in tiers preserves confidentiality and concentrates the seller's attention where it matters most.
5. The Confidential Information Memorandum and First-Round Indications
The CIM is the document that tells the buyer what they are looking at. It is a 50 to 80 page narrative covering the business, the market, the financials, the management team, the growth strategy, and the deal context. It is the seller's primary marketing document, and the quality of the CIM materially affects the quality of the bids.
A good CIM does three things. It tells a clear, defensible story about the business. It anticipates and addresses the questions the buyer will ask. And it puts the buyer in a position to develop a price view without having to come back with a long list of preliminary diligence questions before they can submit an indication.
Common CIM mistakes:
Overpromising on growth. Buyers are sophisticated. Projections that are not supported by the trailing twelve months will be discounted, and credibility will be lost.
Underexplaining customer concentration, churn, or other risk factors. Buyers will find these issues in diligence regardless. Surfacing them in the CIM with the seller's explanation is far better than having them surface in the data room with no context.
Burying the financial detail. Buyers need clean trailing twelve-month financials, a normalized EBITDA bridge, and a forward projection that aligns to the management plan. If the financials require interpretation to understand, the buyer's analyst will produce a different interpretation than the seller intended.
Underweighting the management story. The buyer is buying the team along with the business. The CIM should make clear who runs what, what their tenure and track record are, and what the post-closing roles are likely to be.
After the CIM goes out, the buyers submit first-round indications (typically called IOIs, indications of interest). These are non-binding and indicate price range, transaction structure, conditions, and timing. The IOIs are used to select buyers who advance to management presentations and a second round.
Founders should expect IOIs to come in across a range, and the range itself is informative. A tight range suggests the market is converging on a price the seller can defend. A wide range suggests there are valuation drivers that some buyers see and others do not, and the seller's job in management presentations is to help the lower buyers see what the higher buyers see.
6. Letters of Intent: Where Sellers Concede Too Much, Too Early
The LOI is where most sellers leave money on the table.
The LOI is non-binding on price and structure. It is binding on exclusivity and confidentiality. The asymmetry matters. Once the seller signs an LOI, the seller is locked into negotiating with a single buyer for the duration of the exclusivity period (typically 45 to 90 days). The seller has lost the competitive tension that produced the LOI in the first place. From that moment until closing, every concession the seller makes is one-sided.
Sellers who treat the LOI as a deal sheet, sign it quickly to keep the buyer engaged, and then negotiate the substantive terms during exclusivity routinely end up with worse outcomes than sellers who push hard on the LOI itself.
The LOI should address, with specificity:
The headline price and the structure (cash at closing, rollover equity, earnout, contingent payments).
The treatment of working capital, cash, and indebtedness.
The transaction structure (stock sale, asset sale, merger, F-reorganization).
The closing conditions and the proposed timeline.
The expected indemnification structure (cap, basket, survival period, R&W insurance).
The treatment of management equity, retention, and non-competes.
Exclusivity terms.
Sellers should resist signing an LOI that defers any of these to the definitive agreement. "We will negotiate that in good faith" is not a position. It is an invitation for the buyer to extract concessions during exclusivity that the seller would have refused under competitive pressure.
The most common LOI mistake we see is a too-long exclusivity window. 45 days is plenty for most middle-market deals. 60 days is the maximum. 90 days is a sign that the buyer is not ready to move and is using exclusivity to do diligence that should have been done before the LOI.
7. Due Diligence and the Definitive Agreement
Due diligence is where the buyer's diligence team will examine every claim made in the CIM and every line item in the financials. The seller's job is to produce a clean, organized, documented response that maintains the credibility of the CIM and the projections.
Due diligence is also where the definitive agreement is being drafted in parallel. The two processes inform each other. Diligence findings produce drafting on the rep package, the indemnification structure, the closing conditions, and the post-closing covenants. By the time diligence is largely complete (usually 30 to 45 days after LOI), the definitive agreement is in late drafts and the parties are negotiating the remaining commercial points.
The definitive agreement is where the deal actually gets done. Every founder we have worked with has been surprised by how much commercial substance lives inside what looks like a 100-page legal document. The reps and warranties package, the indemnification structure, the working capital adjustment provision, the closing conditions, the MAE definition, the non-compete, the earnout mechanics, the post-closing covenants, the dispute resolution clause. Each of these has price implications, and each is negotiated in the four to six weeks between LOI and signing.
The seller's counsel runs this. The seller's job is to be available, decisive, and disciplined about not reopening price during the negotiation. The buyer will probe for opportunities to chip on price by raising new diligence findings. Sellers who understood the foundation of the price during the IOI and LOI stages are well-positioned to push back. Sellers who did not are vulnerable.
For more on specific provisions in the definitive agreement, see our pieces on Working Capital Adjustments in M&A and Johnson & Johnson v. Fortis on earnout drafting and the implied covenant.
8. Closing, Earnouts, and the Post-Closing Period
Closing is the easy part. The hard part is everything that happens between signing and closing (the interim period) and everything that happens after closing.
Between signing and closing, the seller is operating the business under restrictive covenants that limit material decisions without buyer consent. The deal is exposed to MAE risk. Regulatory approvals (HSR, foreign investment review, industry-specific regulators) need to be obtained. Each of these is a place where the deal can slip, and the seller's job is to manage them tightly.
After closing, the seller's exposure to the deal continues for as long as the indemnification survival period, the earnout measurement period, and any post-closing covenants run. For most middle-market transactions, that is 18 to 36 months of continuing exposure to a transaction that the seller has already, in some sense, completed.
Earnouts deserve their own discussion. They are common in middle-market deals, particularly when there is valuation gap between buyer and seller, and they are the source of more post-closing disputes than any other provision. Sellers should approach earnouts with two principles. First, earnouts are paid out of the buyer's discretion, which means the buyer has every incentive to operate the business in ways that minimize the earnout payment. Second, earnout disputes are litigated under restrictive contract interpretation principles, which means the implied covenant of good faith and fair dealing is not going to rescue a poorly drafted earnout. The terms have to be clear, measurable, and tied to outcomes that the seller can defend in litigation.
Post-closing covenants (non-compete, non-solicitation, confidentiality, transition services) are negotiated in the definitive agreement and become operationally meaningful after closing. Sellers should treat these as commercial terms, not boilerplate, and should know what they are agreeing to before they sign.
Conclusion
Selling a company is a process. The founders who run it well treat it as one. They use the ninety days before launch to get the business ready. They build a buyer universe that produces real competitive tension. They push back on the LOI before they sign it. They run a tight, organized diligence process that maintains credibility. And they negotiate the definitive agreement with the discipline of someone who knows that every clause has commercial weight.
The founders who run it poorly skip the prep, hire a banker too late, sign an LOI that gives away too much, and find themselves negotiating with a single buyer who has time on their side and information that the seller no longer has the leverage to challenge.
The difference is the prep window, the process discipline, and the team you put around the transaction.
For advice on running a sale process, structuring the transaction, or negotiating the definitive agreement, contact us. Learn more about our Mergers & Acquisitions practice here.
This information is provided by Ebadat PLLC for educational and informational purposes only and is not intended, nor should it be construed, as legal advice or creating an attorney-client relationship. Our Notice and Terms of Use apply. 