Guide: How a Business Sale Unfolds

Summary

Who it's for

Business owners thinking about selling who want to understand the process before they start.

The stages

Seven: free appraisal, proposal, preparation, buyer outreach, offer, exclusivity and completion.

Decision points

Five moments where you, or a buyer, decide whether the sale moves forward. Only the first two end the sale outright. The later ones send the business back to market.

Exclusivity

Once you accept an offer, one buyer has exclusivity, typically for one to three months, to finalise finance and due diligence.

Flow: How a business sale unfolds | Seven stages, five decision points, and what happens at each one | Seller education series

• 1 · Free appraisal
• Price agreed? yes | no → Sale does not proceed → Note: You can revisit a sale whenever you’re ready
• 2 · Advisor sends proposal
• Proposal accepted? yes | no → Sale does not proceed → Note: You can revisit a sale whenever you’re ready
• 3 · Preparation three pieces of work in parallel | Marketing plan: Who the buyer is; who to include or exclude | Data room: Due diligence material, held back until stage 6 | Sale documentation: Teaser, pitch deck or information memorandum
• 4 · Confidential buyer outreach Buyer vetted; confidentiality deed signed
• Sale documents shared Pitch deck or IM
• Buyer response? makes an offer | Not for them — withdraws → Advisor moves to the next buyer → stage 4 → Note: Common, and not a setback for the sale | Wants more information → Advisor answers questions → stage 5
• 5 · Non-binding offer or term sheet Price and main terms, not yet binding
• Your decision? accept | Decline → Back to other buyers → stage 4 → Note: You’re never obliged to accept an offer | Negotiate → A revised offer comes back → stage 5
• 6 · Exclusivity typically one to three months | Buyer finalises finance: Bank or investor funding confirmed | Final due diligence: Data room opened; everything verified
• Outcome of due diligence? | Deal falls over → Issues found; back to market → stage 4 → Note: Not the end of the sale
• Either Share sale contract signed | Business asset sale contract signed
• 7 · Completion Money, ownership and handover

The Seven Stages

1 · Free appraisal

Every sale starts with an appraisal. Your advisor reviews the business and works out the price they believe it could sell for, so you both have a price to work from. Most advisors offer this free of charge. Your advisor will:

• Review your previous years' financial statements
• Compare your business to similar businesses that have recently sold
• Arrive at a sale price they believe the market will actually pay

This is not a valuation for tax or legal purposes. It is your advisor's honest view of what a buyer will pay today. If you can't agree on a price, the sale does not proceed.

2 · Advisor sends proposal

Once the price is agreed, your advisor sends a written proposal setting out their terms for the work. This covers their fees, the length of the engagement, and what they will do for you.

Read it carefully, ask questions, and take advice from your accountant or solicitor if you want a second opinion. Accepting the proposal is the point at which the sale formally begins. If the proposal isn't accepted, the sale does not proceed.

3 · Preparation

With the proposal accepted, three pieces of work run in parallel. When they are ready, the business goes to market.

Marketing plan

Your advisor works out with you who the likely buyer is and how to get in front of them. You decide who should be approached and who should be excluded, and your instructions are followed throughout the process.

Data room

A secure online folder holding everything a buyer will later need to verify: lease agreements, employment contracts, supplier agreements, financial records and the like. You provide it now, while there is time to do it properly, but it is held back until exclusivity, at stage 6.

Sale documentation

What buyers read to form a view on your business. Depending on its size, one or more of: a teaser (a one-page anonymous summary), a pitch deck (a mid-length presentation) or an information memorandum (a full written account).

4 · Confidential buyer outreach

Around 95% of sellers want the sale kept anonymous, and the process is built around that. Buyers are not told who you are until they have been vetted by your advisor and have signed a confidentiality deed (often called an NDA). For each interested buyer:

1. Your advisor approaches the buyer with the anonymous teaser
2. The buyer is vetted and signs the confidentiality deed
3. The buyer receives the pitch deck or information memorandum

The buyer then comes back with one of three responses:

• More information: the most likely response. Your advisor handles their questions.
• An offer straight away: less common, but it happens.
• Not for them: they withdraw and your advisor moves on to the next buyer.

5 · Non-binding offer or term sheet

A serious buyer puts in a written offer, called a non-binding indicative offer or a term sheet. It sets out the price they are prepared to pay and the main terms, but it does not yet commit either side. You have three choices:

• Negotiate: go back on price or terms, usually through your advisor
• Accept: move forward with this buyer
• Decline: the buyer withdraws and your advisor keeps marketing to others

Accepting an offer moves the sale into exclusivity.

6 · Exclusivity

Accepting an offer gives that buyer exclusivity, typically for one to three months. During that period you deal only with this buyer, and the buyer does two things.

Buyer finalises finance

Bank or investor funding for the purchase is confirmed.

Final due diligence

The data room prepared at stage 3 is opened. The buyer verifies everything in the sale documents and examines any other risk areas. Because the material was gathered early, questions can be answered quickly. If issues are found, the deal can fall over and the business goes back to market.

7 · Completion

When due diligence is complete, the parties sign a legally binding contract for either a share sale (the buyer purchases your company) or a business asset sale (the buyer purchases the business and its assets from your company). Your solicitor is closely involved at this stage, and your advisor keeps both sides moving towards signing.

Completion is the day the business formally changes hands. On that day:

• The purchase money is transferred to you
• Ownership of the shares or the business assets passes to the buyer
• The handover of the business to the new owner begins

Any handover period or ongoing involvement you have agreed with the buyer is set out in the contract and starts from completion.

The Five Decision Points

At five points, someone decides whether the sale moves forward. A no at either of the first two ends the sale. A no at any of the later three sends the business back to market rather than ending the sale.

Price agreed?

Yes: your advisor sends a proposal. No: the sale does not proceed.

Proposal accepted?

Yes: preparation begins. No: the sale does not proceed.

Buyer response

The buyer makes an offer, asks for more information, or withdraws and your advisor moves to the next buyer.

Your decision

Accept the offer, negotiate, or decline and go back to other buyers.

Outcome of due diligence

Contracts are signed, or the deal falls over and the business goes back to market.

Where to Start

Every sale begins at stage 1. A free, confidential appraisal tells you what your business could be worth before you commit to anything.