Mergers and acquisitions (M&A) are transformative, offering new opportunities for growth, liquidity, and strategic realignment. As such, the process is intricate—emotionally and legally complex and operationally demanding. Whether you’re a founder, owner, or executive, preparing your company for a merger or acquisition is as much about mindset as it is about meticulous organization. Having an advisor in your corner is an invaluable asset throughout the journey. Below is a to-do list to get started.
1. Prepare Yourself Mentally
For most business owners, selling a company is a once-in-a-lifetime event. The emotional stakes are high: your business may represent years of hard work, personal sacrifice, and identity. It’s common to feel excitement, anxiety, and even grief during the process.
What to expect:
New emotions
Signing on the dotted line can, if not managed and planned properly, lead to negative emotions, even when the deal is lucrative. Be prepared for a rollercoaster of emotions throughout the process – and prepare well in advance.
Complex processes
The M&A process involves negotiations, due diligence, and legal reviews—often unfamiliar territory. Also, most M&A processes involve more than one transaction, each with their own considerations, that need to be managed as a whole. Expect surprises and occasional setbacks.
A process, not just an event
Selling a business is not a single transaction, but a journey that can take months or even years to complete. Being mentally prepared helps you stay focused and resilient when challenges arise.
Action steps:
- Develop at least a rough plan of what you will do after the transaction closes. Some of our clients continue to serve as senior business leaders post transaction. Others plan to phase out over time and spend the time post-transaction training and mentoring the leaders of the next chapter. Other clients dive straight into other interests, such as real estate development, or other business ventures.
- Having a team of trusted advisors is invaluable at this stage. Advisors can help business owners see through blind spots and provide an objective viewpoint that can save time, money, and effort. If possible, make connections with entrepreneurs who have sold similar businesses.
2. Assess the Salability of Your Business
Not every business is ready for sale. Potential partners are looking for companies that are financially healthy, operationally sound, and free of hidden risks. Important time should be spent early on – even years before considering a sale – in order to achieve the best possible outcome.
Key questions to ask:
Contracts
Are all critical contracts assignable, or do they require counterparty approval in a change of control situation? Are there expired or missing agreements? Ensure all vital contracts are in writing and up to date.
Financial health
Review your financial statements for the past several years. Can you explain fluctuations in revenue and profit? Are your books clean and accurate? Do they tell the right story, or are significant adjustments needed to present operations in an accurate manner?
Key dependencies
Do you have customer, talent, or geographic concentrations that potential buyers should be aware of? Having a particular concentration is not necessarily a negative as long as the situation is properly understood.
Operational readiness
Are your processes systemized and scalable? Are there any legal, tax, or compliance issues that need to be resolved? Is the business dependent on you as the owner for it to function?
Action steps:
- Conduct an internal “audit” to uncover potential weaknesses before the process starts.
- Address key employee succession considerations well in advance. Some businesses are sold in less than optimal conditions simply because of a failure to plan for the eventual exit of the owner or owners.
3. Determine What Success Looks Like
Before entering negotiations, define your personal and professional goals for the transaction.
Consider:
Post-sale involvement
Do you want to remain with the company as an employee or consultant? If so, for how long? Is your continued involvement essential for the business’s success? What type of compensation arrangement are you looking for? Are you looking to transition to a different type of role and responsibility?
Non-negotiables
Are there deal terms or conditions you are unwilling to accept? For instance, are you opposed to selling to a competitor or relocating employees? Are there particular deal structures that are impossible? Are there any timelines that must be met?
Personal fulfillment
When you reflect on the transaction several years in the future, what are the key objectives that will have defined a successful transaction?
Action steps:
- Write down your priorities and communicate them with your advisors. Be as specific as possible.
- Be honest about what you’re willing to compromise on and what you’re not. This will help immensely when negotiations start.
4. Get Your Ducks in a Row
Preparation is everything. The more organized you are, the smoother the process will be for everyone involved. It is especially helpful to get organized while time is on your side and there are no clear deadlines in place.
Document and report preparation:
Corporate documents
Gather articles of incorporation, bylaws, shareholder agreements, and board minutes. Some of these items are rarely reviewed in the normal course of business, so it may take some time to uncover them and make sure they are the most current versions.
Financials
Pull your financial statements for the last several years and look at the trends. Are there any months or years that look off? Are there any open items that need to be cleaned up either on the balance sheet or income statement?
Contracts
Collect all customer, supplier, partnership, and employment agreements. Highlight any that contain change-of-control clauses. Also, review contracts for clauses that would make them null and void upon a transaction, or require approvals or consents in order to remain in effect. It is important to address these issues early to avoid unnecessary delays later on.
Intellectual property
Assemble documentation for patents, trademarks, copyrights, and licenses. Intellectual property protection can be a major consideration during a transaction. As such, it is important to properly document all intellectual property.
HR records
Prepare employee rosters, compensation plans, and benefit summaries. Are there any key employees that are pivotal to operations? Are there any employees that are currently compensated above or below what you think the market rate would be?
Legal and compliance
Ensure all regulatory filings, permits, and licenses are current.
Action steps:
- Conduct a mock due diligence review with your advisors to identify and address potential red flags before buyers do.
- If any red flags are uncovered, take steps to mitigate them, ideally before a transaction process is kicked off.
Conclusion
Preparing your business for a merger or acquisition is a multifaceted process that goes far beyond the obvious. It demands mental readiness, honest self-assessment, clear goal-setting, and rigorous organization – all before a transaction process begins. By addressing both the emotional and practical aspects of the journey, you’ll not only increase your company’s attractiveness to buyers but also ensure that the outcome aligns with your vision for the future.
Remember: selling your business is not just a transaction—it’s a process. The better prepared you are, the more likely you’ll achieve a result that brings both financial reward and personal fulfillment.
