What a buyer is really paying for
A buyer pays for future cash flow and tries to protect itself against anything that could reduce it. That shows up as questions about customer concentration, key employees, contracts that need consent to transfer, and liabilities that do not appear on the balance sheet. Structure matters too. In an asset purchase the parties negotiate which assets and liabilities move, though some obligations can follow the business anyway, while in a stock sale or merger the company changes hands along with its history. Price is only one term, and how much is paid at closing, how much is held back or tied to later performance, and how long the seller stays responsible for promises in the agreement can matter just as much.
Getting the company ready to be examined
Before marketing the company, sellers do well to collect what a buyer will request anyway: formation documents and ownership history, material contracts, employment and contractor agreements, permits, tax filings, and any claims or litigation. Reading the contracts for change-of-control and anti-assignment terms early avoids surprises late. Clean up informal arrangements with family members or related companies, and confirm that intellectual property used in the business is owned by the company rather than by a founder or an outside developer. Handle confidentiality carefully, because employees and customers who hear about a sale early can complicate it.
Before the letter of intent is signed
A letter of intent is usually mostly non-binding, but the points it settles tend to stick. Exclusivity is often binding, and once it is granted the seller's leverage drops. We look at the price mechanism, any working capital adjustment, the escrow or holdback, earnout terms, and your role after closing, including any non-compete and employment terms. We also suggest bringing in tax and wealth advisors early, since structure has after-tax consequences that are hard to change once the buyer's draft agreement arrives. The goal is that you know which terms you are giving up before you give them up.
