The sale process: what the buyer does at each stage

The seller defines scope (whole company vs assets), timeline and price expectations. They also normalize EBITDA, identify concentration and dependency risks, and prepare the business narrative. Most sellers skip this and pay for it later.

What the buyer does. Nothing yet — but sellers who did this work compress the buyer’s diligence time and reduce the risk of price adjustment. Those who did not will face questions they cannot answer under time pressure.

Deliverable. Normalized EBITDA baseline, preliminary business narrative, internal decision on structure (asset sale vs share sale). Tools like the EBITDA calculator can support this base.

What kills the deal here. An unrealistic price anchor set before normalization. Example: a manufacturing founder tells their accountant they expect 6x EBITDA on MXN $7M reported. The accountant does not push back. Six months later a buyer offers 4x on MXN $4.2M normalized — a MXN $20M gap vs expectation. The founder rejects the offer as an insult. The deal never gets off the ground. More in Normalized EBITDA.

The seller (or their advisor) prepares a teaser — a 1–2 page anonymous summary of the business — and a CIM (Confidential Information Memorandum) for qualified buyers. The teaser goes out first; the CIM only after an NDA is signed. The buyer list is built around strategic fit or investment thesis.

What the buyer does. Receives teasers from several opportunities at once. A well-prepared teaser that leads with normalized EBITDA and addresses concentration risk head-on gets a faster, more serious response than one that hides or omits risks.

Deliverable. Teaser, NDA template, CIM (if applicable), list of qualified buyers.

What kills the deal here. A CIM that oversells the business or omits known risks. Example: a services company CIM shows MXN $5.8M EBITDA without mentioning that two clients representing 68% of revenue have month-to-month contracts. The buyer signs the NDA, reads the CIM, asks for a call and in the first five minutes asks about client contracts. The seller hesitates. The buyer moves on before a term sheet is even discussed.

The buyer presents a term sheet or LOI that summarizes enterprise value, consideration structure (cash at closing, seller note, contingent tranche), exclusivity period and closing conditions. This document anchors the economics of the deal. What is not negotiated here is much harder to recover later.

What the buyer does. Builds in parallel their internal investment case: normalizes EBITDA on their own, stress-tests the multiple against their minimum return and sizes the seller note they can service with the business’s cash flow. A buyer who shows up with a detailed EBITDA normalization appendix to the LOI has already decided the price is defensible. One who does not has not. For the multiple framework, EBITDA multiple.

Deliverable. Signed LOI with exclusivity, binding confidentiality and governing law. Not binding on economics.

What kills the deal here. The seller negotiates the headline enterprise value without reading the consideration structure. Example: a retail founder focuses only on raising EV from MXN $18M to MXN $20M. They do not notice that cash at closing is 10% (MXN $2M), the seller note runs 4 years at 9%, and the contingent tranche has 6 conditions. They sign. Three months later they understand they will receive MXN $2M on day one in a MXN $20M deal and that the rest depends on conditions they do not fully control. See LOI and term sheet.

The buyer and their advisors (accountants, lawyers, operational consultants) verify everything in the CIM and LOI against source documents in the data room. Three axes in parallel: financial (EBITDA bridge, cash flow, debt, contingencies), legal (contracts, labor, regulatory, IP) and operational (customer concentration, key-person dependency, systems, asset condition).

What the buyer does. Builds a second, independent normalized EBITDA bridge. Every adjustment the seller claimed is tested against documentation. Unsupported adjustments are excluded — and EV is recalculated at the same multiple. The buyer also maps every liability that could reduce the contingent tranche peso for peso.

Deliverable. Due diligence report, updated normalized EBITDA (buyer version), list of findings and proposed price adjustments or protections.

What kills the deal here. An undisclosed liability discovered in diligence that the seller cannot explain. Example: a food distribution company passes financial diligence without issues. In legal, the buyer finds MXN $2.3M in unresolved IMSS arrears that the seller classified as “administrative” and did not disclose. The buyer reduces the contingent tranche by MXN $2.3M peso for peso and demands an escrow holdback. The seller refuses. The deal breaks in week 6 of an 8-week diligence process. More in due diligence.

After diligence, lawyers draft the definitive purchase agreement. This document is fully binding and includes: representations and warranties (formal statements by the seller about the business), indemnification mechanics, closing conditions, escrow terms, seller note terms and contingent consideration structure in full legal detail.

What the buyer does. Turns every diligence finding into contractual protection: a rep and warranty, an escrow holdback, a price adjustment mechanism or an indemnity clause. Every risk the buyer found and the seller played down at LOI stage becomes a negotiation point here.

Deliverable. Definitive purchase agreement, seller note agreement, escrow agreement if applicable.

What kills the deal here. A scope of representations and warranties that surprises the seller. Example: a tech services founder accepts the LOI terms in week 2. In week 10 the buyer’s lawyers send a 45-page agreement with a 3-year indemnity tail on all tax reps, personal guarantee on the seller note and 15% of EV in escrow for 18 months. The seller’s personal lawyer sees it for the first time and recommends rejecting it. The founder had no M&A legal advice at LOI stage — they did not know this was coming.

All closing conditions are satisfied, documents are signed and consideration is disbursed per the structure. Cash at closing is transferred. The seller note is formalized. The clock starts on the contingent tranche. Operational control passes to the buyer.

What the buyer does. Executes the first 100 days plan: meetings with key clients, stabilization of routes or accounts, identification of the 2–3 operational changes that will determine whether contingent conditions are met. The buyer’s incentive after closing is to document any deviation from the seller’s representations that could reduce the contingent tranche.

Deliverable. Signed definitive agreement, confirmation of closing payment transfer, executed seller note, transition plan activation.

What kills the deal here. Last-minute condition failure. Example: a packaging distributor closes diligence without issues. Three days before signing, the buyer’s lender asks for confirmation that the main client (38% of revenue) will honor its supply contract under new ownership. The client’s procurement lead says they need to “review” the relationship. The buyer invokes the MAC (material adverse change) clause. Closing is delayed 6 weeks. The seller note rate is renegotiated upward.

The seller supports the buyer during a defined transition period — typically 6–12 months in SME transactions in Mexico. It includes client introductions, operational knowledge transfer, route continuity and formalizing relationships with key accounts. Contingent consideration conditions are measured during this period.

What the buyer does. Decides, based on what they see in transition, whether each contingent condition will be met. The seller’s cooperation during transition directly affects whether they receive the contingent payment. This is the period where seller and buyer interests are most aligned — and most fragile.

Deliverable. Transition closing documentation, client stability reports, operational handover memo, contingent consideration evaluation at month 12.

What kills value here (post-closing destruction). The seller disengages before conditions are met. Example: a logistics founder receives their note payments on time and mentally moves on. They miss three client introduction meetings in month 4. Two top-5 clients cut orders 30% citing “uncertainty about the new owner.” At month 12 the buyer documents revenue deviation from the seller’s representations. The MXN $3.1M contingent tranche is reduced to MXN $800K. The seller had not read the conditions carefully at LOI stage.