The M&A Process Step By Step

A founder came to us last year after a PE firm had been courting him for six months. They'd taken him to dinners. They'd flown him out to their offices. They'd told him his company was "exactly what they were looking for." By the time he called us, he was deep in diligence with them, and he had no idea if their offer was any good.

It wasn't.

They'd offered 4.5x ARR for a business that, when we ran a proper process three months later, cleared 7.2x. Same company, same metrics, same market. The difference was $14 million in his pocket.

The PE firm hadn't done anything wrong, exactly. They'd done what buyers do: they'd built a relationship, created the illusion of momentum, and anchored him to a number before he had any sense of what the market would actually pay. They were good at their jobs.

The founder's mistake wasn't talking to them. It was letting them run the process.

The process itself is a lever. Run it well, and you create competitive tension, maintain control, and drive better outcomes. Run it poorly (or worse, let a buyer run it for you) and you leave money on the table while exposing yourself to unnecessary risk.

This chapter is your roadmap. We'll walk through every stage of a structured B2B SaaS M&A process, from initial preparation through closing. By the end, you'll understand what happens at each stage, why it happens, what can go wrong, and how to maximize your outcome at every step.

The Problem with Unstructured Processes

Let's start with what not to do.

A private equity firm reaches out. They've been tracking your company, they say. They love the space, love your metrics, and would like to have a conversation. You're flattered. You take the call. It goes well. They ask for more information. You send it. More calls follow. Before you know it, you're three months into a dialogue with a single buyer, you've shared sensitive information, and you're negotiating terms without any sense of what the market would actually pay for your business.

This is how most founders stumble into M&A. It feels efficient: no banker fees, no lengthy process, just a direct conversation with a motivated buyer.

It's a trap.

First, you have no leverage. With only one buyer at the table, you're negotiating in a vacuum. You have no way to know if their offer is fair, aggressive, or insulting. You can't credibly threaten to walk away because you have nowhere else to go. The buyer knows this, and they will use it.

Second, you've ceded control of the timeline. The buyer dictates the pace. They can slow-walk diligence, delay decisions, and drag out negotiations—all while you're distracted from running your business. If the deal falls apart after six months, you've lost half a year with nothing to show for it.

Third, you've created information asymmetry, but not in your favor. The buyer has seen your financials, met your team, and learned your strategy. If they walk away, they take that knowledge with them. If they're a strategic acquirer, they might use it to compete against you. If they're a financial sponsor, they might share it with portfolio companies in your space.

Remember what we covered in Chapter 2 about buyer types? Value buyers make their returns by buying companies below market value. If you only ever talk to one buyer, you're handing them exactly the leverage they need to lowball you.

A structured process flips all of these dynamics. Multiple buyers compete for the opportunity to acquire you. You control the timeline. You determine what information is shared and when. And you have the leverage that comes from knowing—and demonstrating—that you have alternatives.

The structured process is about more than getting a higher price, though it usually does that too. It's about maintaining control of the most important transaction of your professional life.

The Timeline at a Glance

Before diving into details, let's understand the overall arc. A typical process takes four to six months from kickoff to close:

These timeframes are approximate. Some processes move faster; some take longer. The key is maintaining momentum while allowing enough time to maximize your opportunity. There's an old adage: "Time kills all deals." Keep things moving.

Phase 1: Preparation (4-6 Weeks)

A successful M&A process begins long before the first buyer is contacted. This is where you build the foundation for everything that follows. Skimp here, and you'll pay for it later: in delays, in buyer skepticism, and ultimately in valuation.

The Financial Model

The financial model is the cornerstone of your M&A materials. It's the quantitative story of your business. A well-built model demonstrates that you understand your own economics, that your projections are grounded in reality, and that you've thought carefully about the future.

Your model should include three to five years of historical financials, presented monthly. It should include all of the key SaaS metrics that buyers care about: ARR, MRR, churn, net revenue retention, gross margin, CAC, LTV, and payback period. And it should include a forward-looking forecast—typically three years—that shows how the business will grow and what it will take to get there.

The forecast is where many founders stumble. They either sandbag—presenting conservative projections that undervalue the business—or they hockey-stick, showing exponential growth that no serious buyer will believe. The right approach is somewhere in between: ambitious but defensible, grounded in historical trends with clearly articulated assumptions.

As we discussed in Chapter 3, buyers will stress-test your model. They'll ask why you're projecting 30% growth when you grew 20% last year. They'll challenge your churn assumptions. They'll want to understand every line item. The model needs to hold up to this scrutiny.

The Confidential Information Memorandum (CIM)

The CIM is your company's marketing document. It's a comprehensive presentation—typically 30 to 50 pages—that tells your story to potential buyers. A great CIM goes beyond presenting facts. It crafts a narrative that helps buyers understand why your company is special and why now is the right time to acquire it.

The CIM typically covers: executive summary, company history and mission, market opportunity, product and differentiation, customers and retention, go-to-market strategy, team, financial performance, and investment highlights.

The CIM should be professionally designed. First impressions matter, and a polished CIM signals that you're running a serious process. Many investment banks have in-house design capabilities. If yours doesn't, it's worth hiring a designer.

The Teaser

The teaser is a one-page, anonymized summary of the opportunity. It's what you send to potential buyers before they've signed an NDA, a way to gauge interest without revealing your identity.

A good teaser provides enough information to intrigue qualified buyers while withholding enough to protect your confidentiality. It typically includes the industry vertical, approximate revenue range, growth rate, and key investment highlights. It does not include your company name, specific customer names, or any information that would make you easily identifiable.

The Buyer List

The outreach list is your target universe of potential buyers. Building this list is part science, part art, and critical to the success of your process.

A well-constructed list typically includes 50 to 150 names, segmented into tiers based on likely interest and strategic fit. We covered the major buyer categories in Chapter 2 (strategics, PE platforms, tuck-in buyers, and so on), and your list should include representatives from each category that makes sense for your business.

Your investment banker should have deep knowledge of the buyer market and strong relationships with the most active acquirers in your space. This is one of the primary ways a good banker adds value.

It might seem counterintuitive that a banker would have relationships with acquirers given that they end up negotiating against each other. But think about it from the buyer's perspective: bankers typically bring higher quality opportunities that most acquirers are searching hard to find. Quality buyers prioritize the quality of the opportunities over the premium they may pay through a strong banker.

Phase 2: Outreach and NDAs (2-3 Weeks)

With materials ready, the outreach phase begins. This is where the carefully curated buyer list is put into action.

How Outreach Works

Outreach is typically conducted through a combination of email and phone calls. The initial contact is usually an email from your investment banker, introducing the opportunity and attaching the teaser. For high-priority targets, the email is often preceded or followed by a phone call—a warm introduction is more effective than a cold email.

All outreach is managed through the investment banker. This serves several purposes: it maintains confidentiality (buyers don't know who you are until they've signed an NDA), it creates a buffer between you and the buyers, and it ensures consistent messaging across all buyer interactions.

Tiered Outreach

You don't contact everyone at once. Instead, you start with the highest-priority tiers and work your way down.

The logic is straightforward. If Tier 1 buyers are interested, you want to know that before you've committed to conversations with Tier 4 buyers. Early interest from strategic acquirers can be used to create urgency with financial sponsors. And if the highest-priority buyers pass, you still have a deep bench of alternatives.

The tiered approach also helps manage the process—you can only conduct so many management meetings in a given week.

The NDA

Before any confidential information is shared, potential buyers must sign a Non-Disclosure Agreement. Use your own NDA template rather than the buyer's—your NDA will be drafted to protect your interests. Managing modifications to one familiar NDA is much easier than reviewing a different NDA from each interested party.

Some buyers—particularly large strategics with rigid legal processes—will insist on using their own form. In these cases, you'll need to negotiate. But for most buyers, especially financial sponsors who sign dozens of NDAs every month, using your form isn't a significant issue.

Key terms to watch: the breadth of the confidentiality definition, duration of the obligation (one to two years is typical), permitted disclosures to advisors and lenders, non-solicitation provisions for your employees, and standstill provisions for strategic acquirers.

“Through the process that Discretion ran the team were pivotal in helping increase the value of the deal by over 60% as well as improving the terms for the founders. We would work with them again.”

Nick Davies

Founder, Dentally

Phase 3: Engagement (3-4 Weeks)

Once NDAs are executed, buyers gain access to the CIM and supporting materials through a virtual data room (VDR). This is typically a secure online platform, though a Google Drive or Dropbox folder can work at this stage.

Controlling Information Flow

One of the advantages of a structured process is that you control what information is shared and when. In the early stages, buyers see the CIM and financial model—enough to evaluate the opportunity and decide whether to proceed, but not so much that they could replicate your business or poach your customers.

More sensitive information (detailed customer lists, key employee compensation, proprietary technology details) is typically held back until after an LOI is signed. This protects you in case the deal doesn't close.

For SaaS companies, it's common to provide a revenue-by-customer-by-month spreadsheet so interested parties can calculate their own business metrics (net monthly revenue churn, GRR, NRR, etc.). This is normal, but make sure the data is anonymized.

Modern VDRs offer sophisticated tracking: you can see who has accessed the data room, which documents they've viewed, how long they spent on each document. This information is invaluable for gauging buyer interest. A buyer who spends hours in the data room carefully reviewing the financial model is more serious than one who glances at the executive summary and disappears.

Management Meetings

The management meeting is a key moment. It's the first time buyers meet you and your team (usually via video these days). It's where the relationship begins to form, where questions get answered, and where buyers decide whether they want to move forward.

Historically these involved multi-hour on-site meetings. Today they're typically under an hour via video call. The format usually includes: buyer introductions (let them go first; ask them to describe their firm and goals for the call), seller introductions (brief description of your team, the company, and why you're in the market), and Q&A (this is where buyers drill into customer acquisition, churn, the market, competition, team, technology, and financials).

The quality of your answers matters. Buyers are evaluating you as much as the business: your judgment, your credibility, your ability to execute. The good news is you're an expert in your business and should be able to handle any question they throw at you. If they ask for data you don't have top of mind, offer to follow up after the call. If they become argumentative about a topic, offer to follow up and move on.

From your side, the owner should always attend. In many cases only the owner even knows that the company is for sale. If a broader team is aware, they can be included if they have a meaningful perspective that enhances the call.

Phase 4: The LOI Phase (1-2 Weeks)

As management meetings conclude and follow-up questions taper off, the process enters a critical phase: the formal solicitation of Letters of Intent. This is where competitive tension is crystallized into concrete offers.

The Process Letter

The investment banker distributes a process letter to all engaged buyers. This letter formally invites them to submit an LOI and establishes the parameters for doing so.

A well-crafted process letter includes: a specific deadline for LOI submission (creating urgency and ensuring simultaneous offers), required components (enterprise value, payment structure, financing plan, expected timeline, conditions), guidance on your preferences (if you strongly prefer all-cash, say so, and if certain structures are non-starters, make that clear), and next steps after submission.

The process letter is a tool for creating and maintaining competitive tension. By establishing a firm deadline and clear requirements, you signal that this is a serious, structured process with multiple interested parties. The deadline prevents buyers from dragging their feet—without one, some will delay indefinitely.

Comparing LOIs

As the deadline approaches, LOIs begin arriving. Comparing them is more complex than comparing headline numbers. Two offers with the same enterprise value can have dramatically different actual values depending on their structure.

We covered deal structures extensively in Chapter 4, but here's a quick example of how this plays out:

Looking at three offers, Offer B might have the highest headline value but the lowest certainty: less cash, more contingent consideration, a financing contingency, and a longer timeline. Offer C might have the lowest headline value but the highest certainty. Chapter 8 covers LOI anatomy in detail.

Negotiation Tactics

With LOIs in hand, the negotiation phase begins. Several approaches work:

Best and Final: Go back to all bidders and ask for their best and final offers by a specified deadline. Works well when you have multiple competitive offers and want to maximize price without extended back-and-forth.

Favorite First: Select your preferred buyer and negotiate directly with them, using the existence of other offers as leverage. Works well when you have a clear preference and want to move quickly.

Bottom Up: Starting with the weakest offer, push for improvements. Play buyers against each other by sharing (appropriately) that you have competing offers. This can drive higher valuations but risks alienating buyers who feel manipulated.

Signing the LOI

After negotiation, you select the winning bidder and sign the Letter of Intent. This is a significant milestone—but it's not the finish line.

Take a moment to acknowledge what you've accomplished. You've run a successful process, created competitive tension, and secured a commitment from a buyer.

But keep the celebration brief. The deal is not done. You've agreed to negotiate exclusively with this buyer, but they haven't agreed to buy your company. A meaningful percentage of signed LOIs never close. Deals fall apart in diligence. Financing fails to materialize. Buyers get cold feet.

Your banker should promptly notify the unsuccessful bidders, professionally and graciously. You never know when you might cross paths with these buyers again. The message is simple: you've decided to move forward with another party, you appreciate their interest and the time they invested, and you hope to stay in touch.

Phase 5: Confirmatory Due Diligence (6-10 Weeks)

With the LOI signed, the process enters confirmatory due diligence. This is where the buyer verifies everything you've told them and digs deeper into the details of your business. Your goal is to represent your company honestly and maintain the value offered in the LOI.

Chapter 9 covers due diligence in depth, but here's what you need to know at the process level.

The Workstreams

Confirmatory diligence typically includes several parallel workstreams:

Accounting: The buyer (often through a third-party accounting firm) reviews your financial statements, revenue recognition, expenses, and projections. They're looking for accuracy, consistency, and any red flags.

Tax: A review of your tax positions, filings, and potential exposures. Are there any unpaid taxes? Aggressive positions that might be challenged?

Legal: A comprehensive review of your corporate documents, contracts, IP, litigation history, and regulatory compliance. The buyer wants to understand what they're acquiring and what liabilities come with it.

Technology: For SaaS businesses, this is critical. The buyer (often through a specialized firm) reviews your codebase, architecture, security practices, and technical debt. They're assessing the quality and scalability of what you've built.

Customers: The buyer may conduct customer reference calls, competitive analysis, and market research to validate your commercial positioning. Given the sensitivity of this, you can ask to move it to later in diligence when the buyer has assessed other streams.

What Buyers Are Really Doing

There are two primary goals in confirmatory due diligence: business confirmation and risk assessment.

Business Confirmation validates that you accurately represented yourself in the CIM and management meetings, and that the acquirer remains excited to move forward. The goal is to surface any deal killers—things like unclear ownership, fraud, or misrepresented customers. These issues are rare, but they happen.

Risk Assessment identifies and assesses various risks in the business. These risks inform the Seller Representations and Warranties in the Stock Purchase Agreement. You may not agree with these risks, but that doesn't matter—the diligence teams must find something to justify their fees, and the buyer's risk tolerance is often lower than yours.

The Key Metric: Are They Spending Money?

One of the best indicators of buyer commitment during diligence is whether they're spending money. Engaging third-party advisors—accounting firms, law firms, technology consultants—costs real money. A buyer who's writing checks is a buyer who's serious about closing.

Watch for signs of commitment: Are they scheduling site visits? Flying in team members? Engaging their lenders? Each represents an investment in the deal and a signal of intent.

Conversely, a buyer who's slow to engage advisors, reluctant to travel, or vague about their financing should raise concerns.

Speed Matters

Quick turnaround on diligence requests signals professionalism and keeps the process moving. Delays create opportunities for problems: buyer's remorse, market changes, competitive dynamics. The faster you complete diligence, the sooner you can close.

That said, accuracy matters more than speed. A quick response that's incomplete or incorrect creates more problems than a slightly slower response that's thorough and accurate. Find the right balance.

Remember: "Time kills all deals."

Phase 6: SPA Negotiation and Closing (2-4 Weeks)

While diligence proceeds, the lawyers get to work on the Sale and Purchase Agreement—the definitive legal document that governs the transaction.

What the SPA Covers

The SPA is comprehensive, typically 50 to 100 pages plus exhibits and schedules. It covers:

Payment Dynamics: How the purchase price is calculated and paid, including adjustments, holdbacks, and contingent payments.

Representations and Warranties: The statements of fact you make about the business: its legal standing, financial condition, contracts, IP, compliance. These are the basis for indemnification claims if something turns out to be untrue.

Ongoing Operations: How you'll operate the business between signing and closing.

Closing Conditions: What must happen before the deal can close: regulatory approvals, third-party consents, accuracy of representations.

Indemnification: The framework for addressing breaches of representations and warranties: caps, baskets, survival periods, and procedures.

Key Negotiation Points

Several issues commonly require significant attention:

Working Capital Adjustments: The buyer wants adequate working capital to operate normally. Negotiations focus on how the target is calculated and how shortfalls or surpluses at closing are settled. How terms like "indebtedness" are defined can have a large impact on final payments.

Representations Scope: The buyer wants broad, absolute representations. You want narrow, qualified representations. The negotiation focuses on knowledge qualifiers, materiality thresholds, and specific carve-outs.

Escrow and Holdbacks: How much is held back, for how long, and under what circumstances it can be released or claimed.

Earnout Terms: If there's an earnout, the detailed terms (how it's calculated, what protections you have) are negotiated here. See Chapter 4 for earnout best practices.

Employment Terms: The terms of your post-closing employment and non-competition obligations are often negotiated alongside the SPA.

Closing Day

Closing typically occurs on a specific date, often at the end of a month or quarter for accounting convenience. In many deals, signing and closing occur simultaneously: the documents are executed and the funds transferred on the same day. In some deals, there's a gap between signing and closing, typically because regulatory approvals require additional time.

On closing day, the lawyers coordinate document execution, fund transfers, and the various administrative steps required. When everything is in order, the wire is sent.

The deal is done.

Post-Closing

Even after closing, a few matters require attention.

Earnout Administration: If your deal includes an earnout, you'll track performance against the metrics, prepare calculations, and manage any disputes. The earnout period can last one to three years. Don't underestimate the administrative burden.

Follow-On Payments: Escrow releases, working capital true-ups, and other follow-on payments occur according to the schedules in the SPA. Track these carefully and ensure you receive what you're owed.

Integration: If you're staying with the business post-close, you'll be involved in combining systems, aligning processes, and merging teams. This is a significant undertaking that deserves its own planning.

Communication: How will you announce the transaction? To employees? To customers? A well-planned communication strategy ensures key stakeholders hear the news the right way, at the right time, from the right people. Your team has likely noticed unusual activity: meetings with strangers, increased legal activity, your own distraction. A clear, honest communication at the right moment addresses concerns and maintains morale.

The Founder Takeaway

The M&A process is complex, but it's not mysterious. It follows a predictable arc, with well-defined stages and established conventions. Understanding this process—knowing what to expect, what to demand, and when to push, is essential to achieving a successful outcome.

M&A Process Checklist

Preparation

• Develop a detailed, multi-year financial model with historical data and defensible projections
• Draft a comprehensive Confidential Information Memorandum (CIM)
• Create a one-page, anonymized teaser
• Build a tiered outreach list of 50–150 potential buyers
• Establish a secure Virtual Data Room (VDR)

Engagement

• Use your own standard Non-Disclosure Agreement (NDA)
• Track VDR activity to gauge buyer engagement
• Prepare thoroughly for management meetings
• Draft a formal process letter with clear LOI requirements and deadline

LOI Negotiation

• Create a comparison matrix for all received LOIs
• Evaluate offers based on structure and certainty, not just headline value
• Select appropriate negotiation strategy based on competitive dynamics
• Communicate professionally with unsuccessful bidders after LOI signing

Due Diligence

• Dedicate resources to manage the diligence process
• Respond to information requests promptly and accurately
• Engage experienced M&A legal counsel for SPA negotiations
• Prepare detailed flow of funds memorandum
• Develop communication plans for employees, customers, and stakeholders
• Track post-closing obligations including earnouts and escrow releases

This guide is for informational purposes only and does not constitute legal, tax, or financial advice. Consult qualified advisors before making decisions regarding your transaction.