Warren Buffett has a quote that has always stuck with me: "Price is what you pay. Value is what you get." It's interesting because, when it comes to selling a company, most founders reverse the logic: they become obsessed with the price and completely forget to build the value that supports that price at the negotiation table.
Regarding the dozens of sales processes I've overseen, I can say with conviction: those that failed rarely did so due to lack of market interest. They failed due to lack of preparation. The company was sound internally, but it wasn't ready to be scrutinized by those who know where to look for problems. And professional buyers know exactly where to look.
Anyone who knows me knows I'm wary of processes that start with the wrong question. And the wrong question, most of the time, is: "How much is my company worth?" The right question is different. More difficult. More honest. "Is my company ready to be bought by a serious buyer?" It seems like a minor detail. It's not.
Is your company ready to be sold?
This is the question that should come before any discussion about EBITDA multiples. And, most of the time, it's not asked.
A company ready to be sold isn't a perfect company. It's a company organized enough to withstand the scrutiny of a competent buyer — who will bring in lawyers, accountants, consultants, and analysts trained to find what's hidden. And they find it. Almost always.
The problems that most often hinder a sale: inconsistent numbers across years, informal or expired client contracts, excessive reliance on the founder for daily operations, unprovisioned labor and tax contingencies, partners with differing expectations about the process and the price.
Each of these items, in isolation, might be manageable. All of them together become ammunition for the buyer to exert pressure.
I believe many M&A processes should begin with a readiness assessment. Before any valuation, before any conversation with an investor.
The stages of a well-managed sale
A structured sale is a process with interconnected phases.
Each poorly executed stage compromises the next. Without exception.
1. Diagnosis and organization
The first step is to get your house in order — not to make it perfect, but to identify potential issues before the buyer does. This includes financial, corporate, operational, and commercial diagnostics. The party who discovers a problem first gains an advantage in negotiations. If the buyer uncovers it, it often results in a discount.
2. Valuation
A good valuation doesn't just provide a number. It builds a value thesis: outlining the arguments that support the price, the risks that could reduce it, and the assumptions that need to be defended throughout the negotiation. A valuation done in haste, or solely to please the seller, creates expectations that the reality of the numbers and the due diligence will destroy.
3. Information Memorandum
The info memo is the document that introduces the company to qualified investors. It tells the business's story, explains the revenue model, presents figures, market insights, differentiators, corporate structure, team, and growth opportunities. There's a delicate balance here: an info memo that is weak generates doubt. An info memo that is too promotional generates distrust. The ideal is to be clear, elegant, and technically defensible.
4. List of potential buyers
More important than having many names is having the right names. The list can include competitors, companies in adjacent sectors, private equity funds, private equity, family offices, international groups, or industry consolidators. Approaching a buyer without a good fit exposes the company, wastes time, and rarely leads to a good offer.
5. Teaser and NDA
The approach begins with a teaser: a short, anonymous summary designed to pique interest without revealing the company's identity. If there's interest, then comes the NDA, the non-disclosure agreement. Confidentiality in M&A protects value. A leak creates noise with employees, customers, suppliers, and competitors.
6. Progressive Information Disclosure
First, enough to test interest. Then, enough for an indicative offer. Only then, with a qualified buyer and clear rules, does deeper disclosure occur. I like to think of it as a funnel: the further the buyer progresses, the more information they deserve and the more committed they need to be.
7. LOI and MOU
When buyer and seller align on price and general terms, it is customary to sign an LOI or an MOU. These documents record the main terms and pave the way for the due diligence. But beware: a signed proposal isn't money in the bank. Many people treat LOI as a closing. It's not. Between the LOI and the closing there's due diligence, negotiation of definitive agreements, approvals, and sometimes, price renegotiation.
8. Due Diligence
Due diligence is the investigation conducted by the buyer — financial, legal, tax, labor, operational, commercial. If the preparation was good, it tends to confirm the value thesis. If it was poor, it becomes a parade of surprises. And surprises in M&A come at a price. The buyer may ask for a discount, escrow retention, additional guarantees, or simply walk away. It's no exaggeration: according to the KPMG Mergers and Acquisitions survey, the Brazilian M&A market remains active and professional buyers are increasingly prepared to find what the seller didn't disclose. That's why I prefer to disclose relevant risks early — with context and strategy — instead of letting them emerge as discoveries.
9. Final Negotiation and SPA
With the due diligence completed, the negotiation of definitive agreements begins. The SPA — Share Purchase Agreement — it's the share purchase agreement. Along with it come representations and warranties (reps & warranties), indemnities, conditions precedent and, depending on the structure, price adjustment mechanisms. This is where the details matter more than the headlines.
10. Closing
The closing is the final stage. It's when the conditions precedent are met, documents are signed, and the transfer actually takes place. It seems simple on paper. In practice, it's where long and well-managed processes can still stumble over details that weren't aligned at the outset. A well-structured process reaches closing with fewer surprises and more confidence from both sides.
Mistakes that destroy deals
I've seen seemingly solid negotiations fall apart for entirely avoidable reasons. Examples:
- Entering the process unprepared
Once, we advised a company that had received an unsolicited offer from a large group. The partners were excited, scheduled a meeting, and disclosed information without an NDA, without a valuation, and without knowing exactly what they wanted. The buyer arrived prepared. The seller arrived enthusiastic. Enthusiasm has no value at the negotiation table. Preparation does. - Overestimating value and failing to defend it
HP paid US$11.1 billion for Autonomy in 2011. A year later, it took a write-off of US$8.8 billion. The problem wasn't just Autonomy's accounting fraud: it was the superficial due diligence of the buyer. On the other side of the table, sellers who inflate expectations without a defensible thesis face the same kind of collapse, but from the receiving end. - Treating the LOI as the closing
It's common (more common than it should be) for founders to celebrate, tell employees, and change life plans—all after signing a letter of intent. Months later, the due diligence revealed liabilities no one had mentioned, and the deal fell through. Things can go south quickly, and they always pick the worst time to do so. - Negotiating with a single buyer
Without competition for the asset, the buyer sets the rules. I've seen situations where the seller, eager to close, eliminated all other interested parties too early and became captive to a single interlocutor who kept lowering the price with each negotiation round. The real leverage comes from having more than one serious buyer in the running.
Price isn't everything — the complete economic package
This is one of the most common pitfalls: looking only at the headline and ignoring everything else.
A higher-priced offer can be worse if it comes with an earn-out that's improbable — that variable portion tied to targets the buyer controls and the seller will never achieve. Or with highly deferred payment, embedding the buyer's credit risk. Or with guarantees and indemnities so broad that the seller, in practice, never truly exits the business.
What matters is the entire economic and legal package: total price, certainty of payment, payment terms, structure of the earn-out if any, escrow held back, future liabilities, retention of partners, and the real likelihood of the closing happening.
Sometimes the best offer is a bit lower, but cleaner, with a buyer who has made other acquisitions and knows what they're buying. Do you see what I'm getting at?
Frequently asked questions
What is an earn-out in a company sale?
An earn-out is a payment structure where part of the purchase price is contingent on the company's future performance after the sale. The seller receives a portion at closing and the remainder over time, provided that pre-agreed targets are met. It sounds fair on paper — but the devil is in the details. Who controls the targets after closing? What are the payment triggers? How is the outcome calculated? A poorly structured earn-out can turn into a payment that never materializes.
How is the selling price of a company determined?
The price is the result of a negotiation based on valuation — the economic assessment of the business. The most common methods are discounted cash flow (DCF), which projects future results and brings them to present value, and market multiples, which compare the company with similar transactions. The industry, market timing, buyer profile, and the quality of the seller's preparation directly influence the final price. A valuation without a defensible thesis is just a number.
What is due diligence in M&A?
Due diligence is the in-depth investigation a buyer conducts before closing an acquisition. It covers financial, legal, tax, labor, operational, and commercial aspects. The goal is to verify if the information presented by the seller is accurate, identify risks, and assess whether the negotiated price makes sense given the findings. A well-executed due diligence protects the buyer — and a prepared seller benefits from this by revealing risks with advance notice and context.
How long does it take to sell a company?
A well-structured sales process takes, on average, six to eighteen months — depending on the company's complexity, the profile of potential buyers, and market conditions. Companies with better financial and corporate organization tend to have faster processes. Poorly prepared processes often drag on or simply get stuck during due diligence. Engaging specialized advice from the outset helps shorten timelines and avoid rework.
Do I need an advisor to sell my company?
Technically, no. In practice, the difference is significant. Specialized M&A advisors know the process, understand how to structure negotiations, have relationships with qualified buyers, and protect the seller when emotion can outweigh reason. Entrepreneurs who try to manage the process alone almost always come to the table at a disadvantage — the professional buyer has done this dozens of times before. You, most likely, are doing it for the first time.
The difference between selling well and selling poorly
Selling a company well is rare. Not because good companies are rare, but because few founders enter the process having asked the right questions, in the right order, before sitting across from a buyer who has done it dozens of times.
I'm convinced that most sales that went wrong — lower-than-expected prices, stalled negotiations, deals that died in due diligence — didn't happen due to a lack of value. They happened due to a lack of preparation. These are different things. And confusing the two is the most expensive mistake a founder can make.
At Biz Invest, the first conversation almost never starts with the numbers. It starts with the diagnosis. With the thesis. By understanding what the right buyer will see and what they will use against you if you don't get ahead of it.
The buyer buys the company. But before that — long before that — they buy the confidence that what's on the table is the real deal.
If you are considering selling your company, the starting point isn't the multiple. It's understanding what it's truly worth and why. Biz Invest provides this diagnosis with the clarity a serious process demands from the very first minute.
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