Selling a Small Business: Stages of an M&A Transaction

Closing a deal is a long and difficult process and managing the timeline and conducting due diligence efficiently can have a big impact on the performance of the deal. Once a seller begins the selling process, moving quickly is key.

Timing is everything and as the saying goes, “time kills deals.” Moving through the deal process can be time-consuming, and business owners must remain goal oriented and flexible to make sure the deal achieves their goals.

What are the Stages of a Deal?

Most deals follow the steps outlined below:

  1. Strategy Development: The buyer develops an acquisition strategy and reason for seeking out a transaction. They may want to enter a new industry, expand the geographic footprint, acquire new customers, or add a new product line.
  2. Search criteria: The buyer compiles a list of key target company criteria, which may include company size, margins, service offering, industry, customer base, or location.
  3. Universe mapping: Buyers may create a list of, and track, all the companies that they can find that fit within their search criteria parameters and would enable them to execute their acquisition strategy.
  4. Acquisition planning: The buyer initiates conversations with potential target companies to gauge interest, develop relationships and vet whether the company would be a fit.
  5. Valuation analysis: If the owner is open to selling, the buyer will ask for financial and other information to evaluate the opportunity. Based on this data, a preliminary offer may be made, before the two parties negotiate terms and enter into a non-binding Letter of Intent with an exclusivity period.
  6. Due diligence (DD): DD can range from 30 days for a firm like Tide Rock (who has in-house diligence teams) to 90+ days for some other, more traditional buyers. Longer DD periods can distract business owners and their management teams from effectively running their business and can open the window to uncontrollable events that can adversely impact the deal.
  7. Contracts: Once DD is near completion, the final purchase agreement is negotiated and executed.
  8. Secure financing: During the diligence process, a buyer secures financing and receives internal approvals, if necessary. Corporate buyers may require executive and/or board approval to move forward with a deal. It is unlikely that a seller will have direct access to these decision makers.
  9. Sign and close: The final documents are signed, and the deal closes. The management teams begin the process of integrating the two companies.


If getting through the deal-making process quickly is important to you, be sure to ask the buyer about their diligence process. Tide Rock has their own internal accounting and diligence teams. They don’t use bank financing and don’t need additional external approvals, making the process more efficient. On average, Tide Rock closes its transactions 30-45 days after an LOI is signed, while the average buyer can take over double that amount of time.


Christopher Adams

Christopher sources and evaluates new investment opportunities for Tide Rock Holdings and works with existing portfolio companies to execute add-on acquisitions. He maintains Tide Rock’s relationships with investment banks and other intermediaries.