The Typical Phases of a Sell-Side Process
While every transaction has its own wrinkles, most lower middle market sell-side processes follow a broadly similar sequence. Here is what each phase generally involves.
- Preparation & Positioning. Before any buyer is contacted, the advisor and owner typically organize financial statements, normalize earnings (often adjusting EBITDA for one-time or owner-specific expenses), and identify the story of the business, including its growth drivers, customer base, and competitive position. This phase also usually includes early conversations about the owner's goals for a sale, from timeline to post-closing involvement.
- Marketing Materials & Buyer List. The advisor generally prepares a confidential information memorandum (or similar marketing package) describing the business, along with a shorter teaser document that does not reveal the company's identity. In parallel, the advisor and owner typically build a target list of potential strategic buyers and private equity firms likely to have interest.
- Confidential Outreach. The advisor contacts prospective buyers, usually starting with a teaser and, once a non-disclosure agreement is signed, sharing the fuller memorandum. Confidentiality is generally a priority throughout this phase so that employees, customers, and competitors do not learn of a potential sale prematurely.
- Indications of Interest (IOIs). Interested buyers typically submit a preliminary, non-binding indication of interest outlining a proposed valuation range, deal structure, and other high-level terms. This step generally helps narrow the buyer pool to those with realistic and credible offers.
- Management Meetings. Buyers who advance usually meet with company leadership, often in person, to ask detailed questions about operations, customers, and growth plans. These meetings frequently shape a buyer's final offer and give the owner a chance to evaluate cultural fit.
- Letters of Intent (LOIs). One or more buyers typically submit a more detailed, though still largely non-binding, letter of intent. The owner and advisor generally negotiate and select a preferred buyer at this stage, sometimes after a further round of back-and-forth on price and terms.
- Due Diligence. Once an LOI is signed, the buyer typically conducts a thorough review of the business, covering financials, contracts, legal matters, customer concentration, employee matters, and often a quality of earnings (QoE) analysis performed by an accounting firm. This is usually the most document-intensive phase of the process.
- Purchase Agreement & Closing. Legal counsel for both sides typically negotiate the definitive purchase agreement, covering representations, warranties, indemnification, and other binding terms. Once signed, the transaction closes and ownership transfers, often followed by a transition period for the outgoing owner.
Why a Structured, Competitive Process Matters
Some owners are approached directly by a single interested buyer and consider negotiating one-on-one rather than running a broader process. A structured, competitive process, where multiple qualified buyers evaluate the opportunity at the same time, gives an owner more information and more leverage than a single-buyer negotiation. When only one buyer is at the table, that buyer has less incentive to offer their best price or terms, since there is no competing bid to respond to.
Running a process with several buyers simultaneously also tends to surface a wider range of deal structures, from an all-cash sale to structures involving rollover equity or earnouts. That said, a broader process takes more coordination and time, and it isn't the right fit for every owner. The right choice depends on the specific business and what the owner wants out of the sale.
| Phase | What Happens | Typical Focus |
|---|---|---|
| Preparation & Positioning | Organize financials, normalize earnings, define the story | Getting the business sale-ready |
| Marketing Materials & Buyer List | Build the memorandum, teaser, and target buyer list | Preparing to go to market |
| Confidential Outreach | Contact buyers under NDA | Protecting confidentiality |
| Indications of Interest | Buyers submit preliminary, non-binding terms | Narrowing the buyer pool |
| Management Meetings | Buyers meet leadership and ask detailed questions | Evaluating fit and firming up terms |
| Letters of Intent | Buyers submit more detailed terms; a preferred buyer is chosen | Negotiating price and structure |
| Due Diligence | Buyer reviews financials, contracts, legal, and QoE | Verifying the business |
| Purchase Agreement & Closing | Legal counsel finalizes binding terms; transaction closes | Completing the transfer of ownership |
Roles Involved in the Process
A sell-side process typically involves several parties working together, each with a distinct role:
- Owner/founder. Provides information about the business, makes key decisions on offers and terms, and ultimately decides whether and when to sell.
- M&A advisor or investment bank. Coordinates the process end to end, preparing materials, managing buyer outreach, negotiating terms, and keeping the timeline moving.
- Buyer(s). May be a strategic buyer looking to expand operations or a private equity firm pursuing a financial investment; each typically brings different priorities to negotiations.
- Legal counsel. Represents the owner and, separately, the buyer in drafting and negotiating the purchase agreement and related legal documents.
- Accountants and quality of earnings (QoE) providers. Help normalize financials early in the process and, later, support the buyer's due diligence review.
What Business Owners Should Consider
Beyond understanding the phases themselves, a few practical considerations tend to matter throughout a sell-side process:
- Confidentiality throughout. Maintaining confidentiality until it is appropriate to disclose a potential sale generally protects relationships with employees, customers, and competitors.
- Keeping the business performing. A process can run for several months, and buyers pay close attention to how the business performs during that window. Steady performance supports the deal.
- Being ready for diligence requests. Due diligence often generates a large volume of document and information requests; having records organized in advance can help the process move more smoothly.
- Managing employee communication timing. Deciding when and how to inform employees is a sensitive judgment call, and the right timing generally depends on the specific deal and company culture.
Where Salt Creek Advisory May Fit
Salt Creek Advisory runs sell-side M&A processes for lower middle market business owners, generally aiming to structure a competitive process with multiple qualified buyers rather than a single negotiation. Both principals typically stay involved in engagements directly, from preparation through closing. For an owner trying to understand what a process like this would look like for their own business, that may be worth a conversation. How each phase actually plays out varies by business, and no advisor can promise a specific outcome in advance.
Final Takeaway
The lower middle market M&A process follows a fairly consistent arc (preparation, marketing, buyer engagement, negotiation, diligence, and closing), even though the specifics vary from deal to deal. Know these phases going in, and you can set realistic expectations, ask sharper questions of any advisor you consider, and avoid being caught off guard by what each stage demands.