Selling your business, whether to move on to other ventures or because you are ready to retire, is simply one of the most critical events in your life. Seasoned M&A lawyers will take the time to walk you through the process, from the time you engage an attorney (most likely a team of attorneys) through the time your business is officially sold (i.e., the transaction has “closed,” in M&A parlance). However, as the process unfolds it can easily seem overwhelming. With the hope of reducing the number of things that keep you awake at night, in this article we broadly describe some of the key components of the sale process.

1. Timing. From the moment you decide to sell your company, the process can be as quick as a few months to a year or more, depending on a number of things, including how long it takes to find a buyer, if the buyer is fast-moving or very thorough, whether your business is heavily regulated, and, as with many large transactions, the state of the economy at large. We often advise clients selling their businesses to hope for the best and push for speed, but to appreciate that patience may be necessary.

2. Letter of Intent. The letter of intent (an “LOI”) is usually the first document your lawyers will help you negotiate, and, while only a few pages in length, it will include the major terms (purchase price, confidentiality, structure, financing, etc.) that will later show up in the purchase agreement (described below). It is a “non-binding” document—so merely signing it doesn’t mean you’re done!—but it sets forth the parties’ expectations for the deal.

3. Due Diligence. After the LOI, in the “due diligence” phase, you will receive a request list from the buyer asking you to provide a range of documents asking all sorts of questions about your business—who owns it, what do your financials say, what contracts are in force, etc. Most request lists will have tens, if not hundreds, of requests, so maintaining organization in your responses will be critical. Typically, you will upload your responses to a data room—an online site where the documents can be securely read by the buyer. What’s more, after you’ve responded, the buyer will most likely have follow-up (supplemental) requests, so the due diligence phase can be lengthy, but it is vital for the buyer’s understanding of the company they are looking to buy.

4. Purchase Agreement. The purchase agreement will be the most critical agreement, as it quite literally is the agreement that sets forth the key terms of the purchase (and sale!). This agreement may be between 30-70 pages on average and will contain some of the following key terms:

  1. Description of what you are selling (stock? assets? other items?);
  2. Items you’ll have to provide to the buyer to close (“closing deliveries”), including ancillary agreements (as noted below);
  3. Representations and warranties—these are items that involve you making statements about the company (things like, “these are the contracts of the company,” “our financial statements are accurate” and “yes, I in fact own the company”). Your lawyers will spend a lot of time negotiating these on your behalf;
  4. Non-competition agreements (i.e., the buyer won’t want you selling your business and using the proceeds to start a competitor); and
  5. Indemnification provisions (i.e., if your above representations aren’t true, the buyer will want some money back).

5. Schedules. As part of the purchase agreement, you will be required to make (or, literally, “schedule”) certain disclosures about your business. Each schedule corresponds to the representations you make (as noted above), for example, requiring you go through all of the representations in the purchase agreement line by line to list out your contracts or provide financial statements. For this reason, schedule preparation, like diligence, is among the most time-consuming tasks for sellers because you are typically reviewing the diligence you provided earlier and then formally listing it out on the schedules.

6. Ancillary Agreements. The purchase agreement will also refer to “ancillary agreements,” which are shorter, more specific agreements such as transition services agreements, assignment and assumption agreements, intellectual property assignment agreements, real estate leases or deeds, employment agreements, etc. The nature and type of these agreements vary from deal to deal, but there are virtually always a few ancillary agreements.

7. Separate or Simultaneous Sign and Close. In some deals, the buyer and seller sign the purchase agreement and close the same day; in others, the purchase agreement is signed on one date but the sale itself occurs on a later date. You will want to ask your lawyers which makes sense for you, as there are various factors (size of the deal and regulatory requirements among them) that can influence which structure is best.

8. Closing. It’s almost time! In the days before closing, your lawyers will organize all of the final documents (including the purchase agreement!) and sort them for you to sign in advance of closing. Then, when the parties are about ready to close, your lawyers will share your signed documents with the buyer, and the buyer will do the same with its signature pages. Both your lawyers and the buyer’s lawyers will review the documents to make sure everything is there, and if so, the parties will often have a short “closing call” (often 10 minutes or less, quite anticlimactically) to speak and agree that the closing—the sale!—has occurred. It is typically after this call when the buyer will wire the purchase price to your account (you will give them the account information just before closing).

9. Post-Closing. Even after the closing, while most of the work is done, you might ask your lawyers what else needs to be done, if anything. Often there are some legal loose ends to tie up, including post-closing adjustments to the purchase price and earn-out payments. Also, if you have agreed to stay on with the business as part of a transition services or consulting agreement, that period will usually start right after the closing.

Selling your business is a once-in-a-lifetime, defining event for most people, making it both stressful and, ultimately, exciting. Take comfort in knowing that your advisers (including your lawyers) will be with you every step of the way to work hand in hand with you, manage your expectations (and stress level!) and smooth the path for a beautiful ride.