Startup CEO, 2nd Edition

Chapter 52The Sale Process

So, you've committed to selling the company. You've begun the long and winding journey of mentally preparing yourself for the event. You've prepared your company and team for it. Unfortunately, all of that work is the pregame show. Now it's time for the game.

The Arcs of a Deal

While no deal follows a direct or consistent path, there are two general arcs of a transaction that you can anticipate, depending on the situation's dynamics.

If your sale process starts with an inbound offer that you expand to engage other potential buyers to generate competition, the process will look something like this:

• Inbound interest from Buyer 1 leading to nonbinding offer from Buyer 1. This goes by several different names: term sheet, LOI (letter of intent), IOI (indication of interest), LOMU (letter of mutual understanding). These will all ask you to sign some level of “no shop,” or exclusivity. You will try to avoid doing that while working on the next two items in parallel.
• In parallel, you will engage in basic due diligence with Buyer 1 while feverishly working to generate similar interest and LOIs from Buyers 2, 3, and 4.
• Compare offers, settle on a winner, and sign an exclusive term sheet.
• In parallel, engage in deep due diligence and deal documentation with the buyer serving up deal documentation.
• Sign and close (sometimes simultaneously, sometimes not).

If your sale process is a sell‐side process, meaning you determine that you want to sell the company ...