Thinking of Selling Your Business? What to Expect from an M&A Process

Selling a Business? What to Expect from an M&A Process

For most business owners, selling a company is something they will experience only once. They may have spent 20 or 30 years building the business, know their customers and market intimately, and be highly experienced negotiators. But an M&A transaction is different. It can be unfamiliar, time-consuming and, at times, intensely personal.

Understanding what happens during the process, and what will be expected of you, can make a significant difference. While every transaction is different, most successful business sales follow a broadly similar journey.

1. Preparation

The work should begin before potential buyers are approached. The first step is to get a clear understanding of the business being sold, its financial performance, its likely valuation and any issues that could emerge during due diligence.

This typically means reviewing historical and current financial information, understanding maintainable or normalised EBITDA, examining working capital requirements, considering the company's legal and ownership structure, and identifying anything that should be addressed before going to market.

It is also important to be clear about the owner's objectives. Is maximising price the overriding priority? Does the owner want to remain involved? How important are employees, brand, location or legacy? Is there a minimum valuation below which a transaction simply doesn't make sense?

These questions can materially influence how the process is run and which potential buyers should be approached.

2. Valuation and Positioning

A valuation provides an important reference point, but selling a business is not simply a mathematical exercise.

EBITDA and market multiples matter, but buyers will also consider the quality and sustainability of earnings, growth prospects, customer concentration, recurring revenue, management capability, competitive position and the extent to which the business depends on its owner.

The objective at this stage is therefore not just to determine a valuation range. It is to understand why a buyer should want to own the business and where they may see additional value.

That becomes central to how the opportunity is positioned in the market.

3. Identifying the Right Buyers

The highest-profile buyer is not necessarily the best buyer.

Potential acquirers might include competitors, larger companies seeking geographic or product expansion, private equity investors, international businesses entering the market or companies elsewhere in the value chain.

The important question is: who has the strongest strategic rationale for acquiring this particular business?

A buyer that can generate synergies, accelerate growth or gain access to customers, capability or geography may see considerably more value in a business than a purely financial buyer.

A targeted buyer list is therefore usually more valuable than approaching the market indiscriminately.

4. Approaching the Market

Confidentiality becomes particularly important once buyers are approached. Employees, customers, suppliers and competitors may not know that a sale is being considered, and premature disclosure can create unnecessary uncertainty.

Initial approaches will therefore usually provide enough information to establish interest without immediately identifying the company. Interested parties can then sign a confidentiality agreement before receiving more detailed information.

This stage is partly about generating interest, but it is equally about qualifying buyers.

Do they have a credible strategic rationale? Can they finance the acquisition? Who makes the decision? What is their acquisition history? And are they genuinely interested or simply gathering market intelligence?

Not every expression of interest deserves to progress.

5. Indicative Offers and Negotiation

Serious buyers will normally be asked to submit an indicative or non-binding offer. The headline valuation obviously matters, but it should never be considered in isolation.

An offer of €10 million is not necessarily better than an offer of €9 million if significantly more of the consideration is deferred, conditional on future performance or subject to financing.

Owners need to understand the complete proposition: enterprise value, cash and debt treatment, working capital assumptions, payment structure, earn-outs or deferred consideration, the owner's future role and any other significant conditions.

In my experience, this is one of the points at which owners need to resist becoming anchored to the headline number. The quality of the buyer, certainty of funding, conditions attached to the offer and likelihood of actually reaching completion can ultimately matter just as much as the initial valuation.

The strongest offer is not always the one with the largest number at the top of the page.

6. Due Diligence

Once a preferred buyer has been selected, the process usually becomes considerably more detailed. The buyer and its advisers will examine the financial, tax, legal and commercial aspects of the business. Depending on the transaction, there may also be HR, technology, property, regulatory or environmental due diligence.

For an owner, this can feel intrusive. Questions may be asked about decisions made years earlier. Contracts, customer relationships, accounting treatments and historical transactions can all come under scrutiny. Good preparation makes an enormous difference here.

A well-organised data room, reliable management information and prompt, consistent answers create confidence. Missing information, unexplained adjustments or changing answers can have the opposite effect.

One of the realities of an M&A process is that agreeing headline terms can feel like a major milestone, but much of the hard work still lies ahead. Due diligence frequently brings issues to the surface that neither party considered significant at the outset, and seemingly small matters can become important negotiating points as completion approaches.

Due diligence isn't simply about finding reasons not to complete a deal. Buyers are also testing whether the assumptions underpinning their valuation stand up to scrutiny.

7. Working Capital and the Final Price

One area that can surprise owners is the difference between the headline enterprise value and the amount ultimately received. Many transactions are agreed on a cash-free, debt-free basis and assume that the business will be delivered with a normal level of working capital.

Determining what constitutes “normal” can therefore become an important negotiation. Seasonality, debtor and creditor cycles, stock levels, customer payment patterns and recent growth can all affect the appropriate working capital requirement.

This is why owners should understand the mechanics of the transaction rather than focusing solely on the headline multiple.

8. Legal Documentation and Completion

While due diligence progresses, lawyers will negotiate the transaction documentation. The sale and purchase agreement ultimately records precisely what is being bought, how consideration will be paid, what commitments each party is making and how risk is allocated between buyer and seller.

Warranties, indemnities, limitations on liability, restrictive covenants, completion accounts and deferred consideration can all become significant negotiation points. This stage can be demanding because numerous commercial and legal issues may need to be resolved at the same time.

And throughout all of this, the owner still has a business to run.

In my experience, this is one of the most underestimated challenges in a sale process. Transactions can consume an enormous amount of management time and attention, but maintaining trading momentum is critical. A missed forecast or deterioration in performance during due diligence can quickly change the dynamics of a negotiation - precisely when the seller wants maximum leverage.

Final Thought

Selling a business is rarely just a financial event.

For an owner who has spent decades building a company, the process can involve employees, customers, family, personal identity and the question of what comes next. There will usually be moments when a transaction feels straightforward and others when it feels anything but.

Having a clear process, maintaining perspective and understanding which issues genuinely matter can help an owner make better decisions when the pressure increases.

Most importantly, the objective should not simply be to get a deal done. It should be to achieve the right outcome, with the right buyer, at the right valuation and on terms that reflect what the owner wants to achieve.

Because after years spent building a valuable business, the final transaction deserves the same level of thought and preparation that went into building it.

Thinking about selling your business? Stratavera works alongside business owners throughout the transaction lifecycle, from preparing the business and understanding its value through to buyer engagement, negotiation, due diligence and completion.

✅ Learn more about our Exit Strategy & Transaction Advisory services or Arrange a Confidential Discussion today.