Common Mistakes to Avoid When Selling Your Business with a Sell-Side Advisor

Choosing the right M&A advisor and legal team with sell-side experience is essential — but it’s only part of the equation. Even with expert guidance, business owners play a critical role in setting the stage for a smooth, efficient, and profitable transaction. Unfortunately, oversights in preparation or unexpected roadblocks can lead to costly delays, reduced leverage, and added stress.

In sell-side M&A, time truly is money. To help you stay ahead, here are some of the most common mistakes sellers make — and how to avoid them.

1. Internal Due Diligence – Leaving No Stone Unturned

While preparing to sell a business, it’s very easy for the founders of any enterprise to rely upon their vast and detailed knowledge of the company. As a seller, it can feel like overkill to do your own extensive due diligence even before a transaction commences, putting yourself in the shoes of a buyer who has little or no familiarity with the business’s operational details. Still, it’s a common mistake to neglect to conduct a thorough internal due diligence with your advisor even before reaching out to prospective buyers.

Change in Control Provisions

Understanding how a potential sale may impact existing contracts is a critical part of early internal due diligence. Agreements with vendors, lenders, employees, landlords, and licensors should all be reviewed to identify any change in control provisions. While some clauses require nothing more than written notice, others may trigger more complex obligations — or even the need for renegotiation. Identifying these provisions before entering discussions with buyers allows sellers and their advisors to proactively address any issues, keeping the transaction on track and minimizing disruptions.

Buyer Confidence and Smooth Transactions

Conducting a comprehensive internal due diligence positions sellers to address any issues before they impact the sale –  it allows the seller to be quickly responsive to buyer requests, prevents costly delays, and inspires confidence in any prospective buyer. Time is money, of course, conducting well-executed internal due diligence early in the process can dramatically reduce the costs of any sale transaction.

2. Assessing All Tax Implications

State and Local Taxes

Businesses with operations in multiple states and local jurisdictions, however limited those operations may be, often have tax exposure that they don’t anticipate. Failure to identify state and local tax exposure (sales and use taxes, for example) or not remedying state and local tax liabilities can affect closing costs and timetables as transactions proceed. It’s a detail that’s important not to miss and is something that experienced M&A sell-side advisors and legal counsel have on their radar.

Tax Implications of the Sale

The way in which the sale of a business is structured dramatically affects possible tax outcomes. When working with skilled sell-side advisors, understanding different possible deal structures in light of those outcomes is essential from the very beginning and throughout a sale, from concept to closing.

3. Focus on Ongoing Operations

A common mistake made by business sellers is to lose sight of operations and financial performance while working on their pending transaction. Keeping eyes on the ball so that the business continues unaffected by the deal process is vital to the success of the sale: employee relations, supplier and customer relationships, delivery of goods and services, invoicing counterparts, paying the company’s bills, all need to keep on track. A dedicated sell-side advisor helps you stay focused, ensuring the business continues to perform while the deal progresses. Consistent performance before and throughout an acquisition gives prospective buyers confidence that valuations and resulting pricing are accurate and that the business will remain profitable post-sale.

In addition, the sale price of a business is frequently predicated on the ongoing results of the enterprise – the final purchase price commonly adjusts for changes to working capital or cash flows of the business. Keeping focus on the business’s financial performance with the help of your sell-side advisor throughout the transaction process therefore helps keep any adjustments to purchase price advantageous to the seller.

4. Protecting Confidential Information

Non-Disclosure Agreements

Non-disclosure agreements (NDA) are so ubiquitous that it can be too easy to diminish their importance. Binding potential buyers and their advisors to a comprehensive NDA paves the way for a sale negotiation that is transparent and smooth, and so enhances the buyer’s confidence in the accuracy and fairness of the purchase price and the ultimate value of the business they are purchasing. As a critical protective tool for sellers in the event that negotiations stall or fail, a properly constructed NDA restricts any prospective buyer from contacting or soliciting the seller’s suppliers, contractors, employees, and other people or organizations that participate in its ongoing operations.

Premature Release of Confidential Information

Particularly in sale transactions where the buyer is a strategic competitor of the target business, familiarity and comfort of the parties can make it tempting to share confidential information before an NDA is in effect. Nonetheless, it is a mistake to disclose company information without an NDA. The protections of an NDA are not merely for the proprietary details of the enterprise: even the existence of negotiations for a sale of the company disclosed to employees and people with whom the seller conducts business can be disruptive to ongoing operations.

Virtual Data Room

Compiling all relevant information and documentation of an ongoing business into an online resource can be a time-consuming and costly process. As with the case of internal due diligence, however, taking the time and effort to set up and complete a secure virtual data room dramatically improves the transaction process and ultimately reduces its overall cost. Often specifically contemplated by the NDA, a virtual data room is a secure online library where all parties to a transaction (and their advisors) maintain access to the data and documents that they’ve exchanged in due diligence. A well-constructed virtual data room hastens the buyer’s due diligence and allows the sell-side to control access and track buyers’ use of that sensitive material. Post-closing, the virtual data room survives as a useful archive of the transaction and the business that was sold, whether for mediating any disputes, resolving claims, assisting with audits, and other processes where those details remain relevant. A well-organized virtual data room doesn’t just support due diligence — it accelerates trust, confidence, and value.

5. Post-Sale Integration Planning

It’s far too easy for sellers to have the mindset that the sale of the business ends at the closing. Planning for what happens to the business post-closing as part of the original concept for the sale of an enterprise can have a big impact on the perceived value for prospective buyers. Working with your M&A advisor early in the process to make staff retention plans, timelines for transitioning systems to the buyer’s, and integrating business strategies provides a great deal of peace of mind for the transacting parties and everyone else involved in the business. When it comes to post-closing operational planning, early is on time.

As with all aspects of selling a business, a trusting relationship between sellers and experienced sell-side advisors like Optima Mergers & Acquisitions from the very beginning can prevent a long list of common pitfalls from developing into problems. When the goal of all parties is to maximize perceived value for both the seller and the buyer, investing in preparedness is the key to preventing these common mistakes.