Steps in Selling Your Business

Before the Letter of Intent

  • Early preparation--one to three years prior to selling your business (see due diligence review)
  • How to find buyers
  • Early Interest (“Kick the tires”)
  • Be careful not to reveal too much
  • Some competitors may use this stage to gather information
  • Confidential with financial information.
  • Non-Disclosure Agreement
  • Prohibit use and disclosure of information
  • Watch for “tie-up” clause
  • Negotiate terms of Letter of Intent

Letter of Intent

  • Basic terms (Price, Payment)
  • Asset sale, stock sale, merger
  • “No shop” clause/disclosure of interest by others
  • Due diligence period
  • “Usual” reps, warranties, conditions, indemnification
  • Is there an escrow?
  • Non-binding/cannot force a close

Between LOI and Closing

  • Due diligence review
  • Legal compliance
  • Ownership of assets
  • Ownership of stock
  • Intellectual property rights
  • Contracts of all types
  • Information about customers
  • Information about vendors/suppliers
  • Tax compliance
  • Employee/independent contractor issues
  • Real property
  • Liabilities/claims
  • Government investigations
  • Environmental

Negotiate terms of merger/sale agreement

  • Conditions to close—financing in place, e.g.
  • Enter into contracts with key employees
  • Consent to assign/transfer contracts, permits, leases
  • Non-competes for those leaving
  • “Fix” problems from due diligence
  • Representations, warranties and schedules
  • Indemnification
  • Working capital targets
  • Earn-outs

Other Agreements When Selling Your Business

  • Employment agreements
  • Non-compete agreements
  • Escrow agreement
  • Note, Guaranty, Security agreements
  • Assignments and Bills of Sale


  • Money paid
  • Documents exchanged
  • Celebration dinner