How to Sell a Company: The Complete Guide

By Marc Serra Faus, founder of MERGERS&.

Selling a company is, for most owners, the most important transaction of their life and, almost always, the only one they will do once. Across the table they will face someone who buys companies every week. That asymmetry —one who sells once, the other who buys always— explains why so many deals close below their potential, and why preparing makes all the difference between selling well and selling short.

This guide walks the full path, from start to finish: when to sell, what your company is worth, who buys it, the two phases of the process, who supports you and how much it costs. It is the map of selling a company, and each stop links to the article that develops it in detail, so you can go deeper exactly where you need to.

At MERGERS& we do one thing: sell companies. That’s why this guide is written from a single point of view —that of the owner who sells— and with a single goal: that you reach the market with the deal well designed.

What Selling a Company Means

Selling a company means transferring its ownership and control to a new owner, and it does not always mean selling one hundred percent or disappearing the next day. It can be a total sale, a majority sale with reinvestment, bringing in a partner or the sale of a part of the business. What changes in every case is who decides from closing onward.

More important than the legal label of the deal —the difference between a merger and an acquisition— is understanding what the buyer wants to do with the company after buying it. On that intention depend the continuity of the brand, the future of the team, your role after the sale and much of the price. That’s why, in a sale, the owner does not only ask how much they will be paid: they also ask what the buyer plans to do with what they have built.

Is It the Right Time to Sell Your Company?

Knowing whether it is the right time to sell your company is the first decision, and it does not depend only on the market: it depends on the company, the partners and you. Before thinking about buyers, it is worth being clear on three things: why you’re selling, whether the partners want the same, and what exit alternatives exist.

The reasons to sell —liquidity, succession, a partner, reducing risk, a new stage— determine the type of deal you’re after. The alignment of the partners is the foundation of everything: a sale with partners in disagreement breaks from within before reaching the market. And knowing the exit options avoids going to market to sell 100% when perhaps you need something else. The optimal moment —what we call the Exit Momentum™— combines those three dimensions, and is checked before going out, not after.

What Your Company Is Worth

What your company is worth is not an objective number, but the result of a negotiation between what it is worth to you and what it is worth to the buyer who can best exploit it. Hence the first thing is to separate two ideas that get confused: value and price are not the same.

In practice, the value of a mid-sized company usually starts from its recurring profit. That’s why the normalized EBITDA —the result cleaned of one-offs— matters, and so does the multiple that EBITDA can defend before real buyers. From there you have to cross the bridge from enterprise value to equity value, which discounts debt and adjusts cash, because the price you collect is that of your shares, not that of the company. And above all is strategic value: the same company can be worth much more to whoever needs exactly what it has.

Who Buys Your Company

Who buys your company shapes the price as much as what it is worth, because not all buyers value the same or pay for the same. Knowing the types of buyer is the first step to figuring out who can pay more and why.

Broadly, there are two families. The strategic buyer —a competitor, an industrial group, a consolidation platform— buys for synergies: they can pay more because your company is worth more in their hands than in those of an investor. The financial buyer —private equity funds, family offices, search funds— buys for returns, finances with debt and seeks a future exit. Finding the right buyer, and generating competition among several, is what turns a good theoretical value into a good real price.

The Two Phases of a Sale: Design and Execution

A well-run sale has two phases with a decision in the middle: first you design, then you decide whether it’s the moment and, only then, you execute. Confusing the order —going to market without designing— is the number-one cause of deals that break at the end.

Phase 1 · Design: prepare the company before going out

Design consists of checking the viability of the sale before exposing the company to the market, working on four fronts: the alignment of the partners, the exit options, the price zone and the red flags. These are the 4 Pillars of M&A™. In this phase the red flags —the risks a buyer will use to renegotiate— are anticipated, a plan is defined to mitigate them, and it is decided whether it is truly the Exit Momentum™. Designing well has a double advantage: it accelerates execution and protects confidentiality, because you don’t go to market until the deal is solid.

Phase 2 · Execution: take the company to market

Execution is taking the company to market and steering the deal through to closing, and it unfolds in four stages: information, communication, negotiation and closing. The sale materials are prepared, buyers are contacted under confidentiality, and you enter the negotiation: the letter of intent, the due diligence and the contract. That is where it is decided whether the agreed price ends up being yours, in documents like the letter of intent and the sale and purchase agreement, with their guarantees. A good design makes this phase faster and with far more assurance of closing.

How Long It Takes to Sell a Company

Selling a company is usually measured in months, not weeks: an orderly process runs from roughly one or two months of design to between six and twelve of execution, plus a later transition. The timeline depends, above all, on how prepared the company arrives. You have the stage-by-stage breakdown in phases and timelines in the sale of a company.

Who Supports You: The Advisors

Selling a company demands a team of advisors, because directing the deal, valuing, negotiating and documenting are different capabilities from those needed to run the business. Well chosen, that team is not a cost that lowers the price, but an investment that raises it. In the advisors in the sale of a company you’ll see who makes up the team; the central role belongs to the M&A advisor, and here are 10 reasons to hire an M&A advisor.

How Much It Costs to Sell a Company

How much it costs to sell a company depends on the deal, but it’s worth understanding the logic: the M&A advisor works mostly on success, while other costs (legal, tax) scale with complexity. You have the full detail in costs of selling a company. At MERGERS& we charge a fixed fee for the design phase and tie the execution fees to the success of the sale, without monthly retainers.

How MERGERS& Does It: The MERGERS& Method™

Everything above is organized into a proprietary methodology, the MERGERS& Method™, which separates the sale into the two phases —design and execution— and works them with 6 proprietary tools. One of them, the Diamond Matrix™, is the point where the method meets our theory of company value. It is the answer to the question that gives this guide its title —how to sell a company— turned into a system.

Before Selling: What You Need to Have Ready

Five things organize the preparation of a sale. If you have them worked out before going to market, you arrive from a position of strength:

1. Aligned partners. Everyone who must sign wants the same, at the same price and on the same timeline.
2. Reliable information. Clear accounts, a defensible EBITDA and documentation ready to withstand due diligence.
3. A realistic price expectation. A number the market can pay, not the one you’d like.
4. Mitigated red flags. The risks the buyer will look for, detected and resolved beforehand, not discovered by them.
5. The right buyer identified. Knowing who can pay more and why, and reaching several to generate competition.

The underlying rule: almost everything that decides the price is prepared before going to market. When a deal breaks at the end, the problem was almost always there from the start.

The Key Idea

Selling a company is not decided in the final negotiation: it is prepared beforehand. The path has two phases —designing the exit and then executing it— with a decision in the middle: whether it is truly the moment. Before going out you have to know why you’re selling, what the company is worth and who can pay more; and you have to arrive with the partners aligned, the information reliable and the red flags resolved. Doing that prior work well is what turns a good theoretical value into a good real price, and what separates selling well from selling short. That is, in a phrase, the purpose of the MERGERS& Method™.

Do You Want to Sell Your Company?

At MERGERS& we do one thing: sell companies. We don’t buy, we don’t refinance, we don’t do standalone valuations. We only sell companies, with a proprietary method and 100% on success.

If you’re reading this guide it’s because, sooner or later, you’ll face the most important deal of your business life. The sooner you start designing it, the better your company arrives at the day of the sale — and the better the price it defends. That is exactly our work: to design and execute the sale of your company so it reaches the market from a position of strength.

Frequently Asked Questions About How to Sell a Company

Keep Exploring

• The MERGERS& Method™: the methodology to sell your company
• Phases and timelines in the sale of a company
• Reasons to sell a company
• What your company is worth: value and price
• The types of buyer: who can buy your company
• The advisors in the sale of a company
• Costs of selling a company
• The red flags: the risks that break a sale