Most owners of manufacturing, industrial services, and trade businesses sell one company in a lifetime. The buyer across the table has done this many times, and so has the buyer’s counsel, its lender, and the accounting firm it hires to take apart your financials. That asymmetry is something a first-time seller should be considering. That is where an experienced investment banker comes in.
This article walks through what a sell-side process involves: what happens in each phase, what your advisor is doing, what you will be asked to do, and the handful of moments where a well-run process produces a materially better outcome than an unprepared one. A note on timing before we begin. A typical process runs six to nine months from engagement to closing. That is a reasonable planning assumption, not a promise. The actual timeline depends on how ready the business is when the work starts, how buyers respond, what is happening in the broader market, and decisions the seller makes along the way. Some transactions close faster, but many take longer.
Phase One: Preparation
This is the longest phase, and it starts well before anyone outside the company knows a sale is being considered. Its purpose is simple: by the time a buyer sees the business, every question the buyer will ask has already been asked and answered internally.
The work falls into three buckets. The first is the financials. We will rebuild the last three to five years of results to show what the business earns: normalizing salary, removing one-time expenses, separating the personal from the operational, and documenting every adjustment so it survives scrutiny. The second is the operating story. Customer concentration, backlog, recurring versus project revenue, workforce certifications, safety history, and management depth all get analyzed and, where the numbers are good, put front and center. The third is the materials themselves: a confidential information memorandum (CIM) that tells the story of the business and a financial model that supports it. Of the three, the model matters most. Buyers read the memorandum once. They live in the model.
Your job in this phase is candor. Weaknesses in the business will be found in diligence regardless, and a weakness you disclose and explain in month one is a footnote, while the same weakness discovered by the buyer in month six is a price reduction. Your other job is to decide what a good outcome means beyond the headline number: what happens to your people, whether you want a role after closing, whether you would keep a stake, and what you will not sell regardless of price. Those answers shape everything that follows.
In DGP’s experience, this phase is where the difference between an unsolicited offer and a competitive-process result is made. For example, when DGP represented Highland Commercial Roofing, the winning bid came in roughly 50% above the unsolicited offers the owners had received before the process. That gap was not created at the negotiating table. It was created by presenting a business that buyers could underwrite with confidence.
Phase Two: Identifying the Right Buyers
With the materials in hand, the next step is to build the buyer list. The goal is a curated group of parties for whom your specific business fills a need, whether that is a service capability, a geography, a customer base, or a credentialed workforce they cannot build on their own. A buyer who needs what you have will pay for it.
The list is developed with your input. You will be asked which competitors and customers cannot be approached under any circumstances, who you would be comfortable selling to, and who you would not. The final list is frequently shorter than owners expect, and that is by design. In DGP’s process for The PK Companies, the transaction was marketed to a select number of acquirers focused on industrial services rather than to the widest possible audience, and the result exceeded the owners’ expectations.
Phase Three: Going to Market
This is the phase owners picture when they imagine selling. Buyers first receive a short, anonymous summary of the opportunity. Those who want to learn more sign a non-disclosure agreement (NDA) and receive the full memorandum. After a few weeks of review, interested parties submit a first-round indication of interest (IOI): a preliminary valuation range and a proposed structure, not a firm offer. Then, you narrow the field, and the selected buyers are invited to management presentations, where your leadership team walks them through the business in person and answers questions. After that round, buyers submit letters of intent (LOI) with a specific price and terms. You choose one, and the process moves into exclusivity.
Two things worth understanding – 1. How to read an offer. The headline number and the cash you receive at closing are rarely the same figure. Earnouts, rollover equity, seller financing, working capital adjustments, and escrows all sit between them, and comparing offers means comparing all of those terms together. We put every offer on the same page so the comparison is real.
- Management presentation. This is where your second tier of leaders earns the buyer’s confidence that the business runs without you. In every DGP transaction, a long-tenured management team incentivized to grow was among the attributes buyers weighted most heavily. Preparing that team to present is part of the process.
This phase is also where a competitive process earns its keep. Multiple interested buyers, moving on the same timeline, with an advisor managing the communication between them, is what produces a market-clearing price. Once you sign an LOI and grant exclusivity, that leverage narrows.
Phase Four: Confirmatory Diligence
After the letter of intent, the buyer verifies everything it has been told. In this sector, that typically means a quality-of-earnings review by the buyer’s accountants, legal diligence on contracts and entity structure, review of insurance and claims history, safety and environmental records, licensing and certifications, customer calls, and an examination of your systems and data. Sixty to ninety days is a common planning window, though as with the process overall, the actual duration depends on the buyer, the complexity of the business, and how quickly information can be produced.
Diligence is where preparation pays its dividend. Because the financial normalization, the customer analysis, and the documentation were completed in phase one, the buyer’s team is largely confirming what it already knows rather than discovering something new. DGP’s role in every engagement includes hands-on diligence support through closing, and it is this phase that owners most appreciate.
Your only job during diligence: keep running the business. Buyers are watching current performance closely, and a strong quarter during diligence reinforces every number in the memorandum. The process is designed so that the advisor carries the transaction and you carry the company.
Phase Five: Closing, and the Day After
The final phase is the negotiation of the purchase agreement and the documents that travel with it: representations and warranties, indemnification and escrow terms, the working capital target, employment agreements, non-compete terms, and, if you are keeping a stake, the equity documents for the new company. We work alongside your transaction counsel to keep the business terms agreed at the LOI stage intact through the definitive agreement. Then funds move, and the company has a new owner.
What comes next depends on what you decided back in phase one. Some owners stay through a transition of a year or more. Some stay for good, with a partner behind them. Some step away. Buyers care about that plan nearly as much as you do, because the people, customers, and reputation they just bought are tied to it. Having the answer early, and building the process around it, is what allows a sale to feel like a transition rather than an exit.
What You Will Be Asked For
Owners often want to know what the preparation phase requires from them in practical terms. Each business is different; therefore, the requests will be tailored to your business, but the standard documents and data an owner should expect to gather include things such as:
- Three to five years of annual financial statements, plus monthly or quarterly results for the current and prior year
- Tax returns for the same period
- Revenue by customer and by service line, and a customer list with tenure and contract status
- Current backlog, open proposals, and any master service agreements
- An organizational chart with tenure, compensation, and certifications for key employees
- Safety records, insurance policies, and claims history
- Licenses, permits, and certifications held by the company and its personnel
- Leases, equipment lists, and any related-party arrangements
- Corporate records: entity documents, ownership, and any prior transaction or financing agreements
The Process Is Something You Control
A sale is not something that happens to an owner. It is a sequence of decisions, most of which are made before any buyer is involved, and the quality of those decisions is what determines whether the outcome reflects the business you built. The owners who do best are rarely the ones with the strongest market timing. They are the ones who started preparing early, were honest with themselves and their advisor about the business, and let a competitive process do what it is designed to do.
If you are one to three years from a decision, that is not too early to talk. It is the ideal time. Contact us here.