Date:
February 20, 2026
Author:
Ian R. Cohen
/
Principal
You've done the hard part: cultivated and nurtured a successful growing business. You didn't do that in one day. You shouldn't sell it in one day either. Most business sales don't fail because of price. They fail because sellers lose leverage too quickly.
The Planning Process: More Than a Napkin Agreement
When I represent a Seller, I'd love to simply write the purchase price on a napkin with some wire instructions and call it a day. Unfortunately, reality is more complex. Almost any purchaser will want to conduct diligence, review financials, and engage their own attorney to ensure they are protected.
Even if you have already identified a buyer, taking early steps to organize your records creates a smoother path to closing and prevents "deal fatigue."
Valuation and Financial Health
Understand how much your business is worth and what you are willing to walk away with.
- Clean Books: Ensure your financial statements are organized and transparent.
- Audits: Consider having your financials audited if they aren't already: this builds immediate trust with high-value buyers.
- Buyers interpret messy financials as undisclosed risk and discount value accordingly.
Assembling Your Team of Deal Professionals
Selling a business is a team sport. At a minimum, you will need:
- An Experienced Sell-Side M&A Attorney: To navigate the legal minefields each step of the way.
- Financial/Tax Professionals: To minimize the tax "bite" of the sale.
- Business Broker: If you haven't identified a buyer, a broker can run a robust sale process to find the most competitive offer.
Surrounding yourself with people who live and breathe transactions gives your sale a greater chance of success.
Identify the Type of Buyer
The "who" matters as much as the "how much." Generally, you will encounter two types of purchasers:
- Strategic Buyers: Competitors or other companies in related fields who want to strengthen their own position by adding your business.
- Financial Buyers: Private equity firms or other investors looking primarily at your cash flow and ROI.
The Virtual Data Room (VDR)
Have your files organized and ready for review. If you are scrambling to collect and provide documents after a potential buyer has made requests, you are already creating unnecessary friction. Use a digital data room to host documents and protect confidential information.
Letter of Intent (LOI): The Foundation
A letter of intent or a term sheet is the foundation of the deal. It is typically non-binding, but outlines the high-level terms of the deal subject to further diligence.
- Warning: Many sellers get into trouble at this stage by going it alone without counsel, only to realize they are boxed into certain unfavorable terms.
- Even though a term sheet is non-binding, buyer's counsel will point to it as "gospel" and it is difficult for a seller to go back on those terms without creating mistrust.
Navigating Due Diligence
Now that you are working with one buyer (or multiple potential buyers if you are running a full process), they will expect an opportunity to review the actual financials and contracts of your business. They will seek to know customer names, churn rates, and may even want to speak with them as a reference. Don't get unnerved or discouraged by the seemingly never-ending list of questions. Even though it may feel like an interrogation at times, don't take it personally. The buyer and their advisors are just working the process, although certain requests you can and should push back on.
- Competitive Protections: If selling to a competitor, you must withhold certain sensitive information until the deal is nearly certain and ready to close.
- Level-Setting: Experienced counsel knows when to provide info and when to propose alternatives.
The Purchase Agreement and Disclosure Schedules
In parallel with diligence, the potential buyer will likely want their counsel to prepare the purchase agreement. Buyers are the reason purchase agreements are so lengthy and have so many terms: seeking reps and warranties, closing conditions and indemnities. This gives comfort that the business is as you describe and they are getting what they bargained for.
- Seller Counsel's Role: Focuses on adding limitations and exceptions to help you keep as much of the sale proceeds as possible.
- Disclosure Schedules: These are time-consuming but vital as they are your primary defense against post-closing legal claims.
- The purchase price is negotiated once but risk allocation is negotiated throughout.
The Signing/Closing
Following diligence (which generally never ends as the buyer will always have more questions that can only be answered after they assume ownership of the business), and final drafts of the purchase agreement, the signing or closing will take place. This is when the deal is locked in or funds and ownership exchange hands. Depending on the transaction, certain closings are quick and easy with others having more moving parts and critical post-closing obligations.
Start Today
The best time to prepare for a sale is before buyers begin asking questions, not after leverage has shifted. Sellers who prepare early control the process. Sellers who react get caught flat-footed.
Ready to start your exit strategy? Contact IRC Legal today and position yourself for a controlled, successful sale.
