After Signing an Offer: Managing the Due Diligence and Closing Process

The due diligence period begins when the Letter of Intent (LOI) is signed. This is a critical phase, typically lasting 30 to 90 days, during which the buyer verifies all aspects of your business and arranges financing. The buyer will review financials, operations, legal documentation, and other key business details to confirm the business meets their expectations.

The success of this phase depends on meeting deadlines and providing the necessary documents and information.

To ensure everything remains on schedule, we will hold weekly 15-minute calls with the buyer throughout the due diligence period. These calls serve several purposes:

• Tracking your progress in gathering and submitting requested documents.

• Monitoring the buyer’s diligence activities, including financial analysis, lending arrangements, and legal preparations.

• Addressing any immediate concerns that may arise on either side of the deal.

These check-ins help maintain momentum and minimize delays.

During due diligence, the buyer and their lender will likely have questions regarding various aspects of the business. Prompt responses are essential to keep the process on track and ensure all deadlines agreed upon in the LOI are met.

Buyers may ask for additional financial records, contracts, or operational details, while lenders might require documentation to support the underwriting process. Timely cooperation in providing this information builds trust and improves the chances of a successful closing.

The buyer’s lender will simultaneously conduct the underwriting process to determine whether they will approve financing for the acquisition. This involves a detailed evaluation of your business, including its cash flow, assets, and risk factors.

Lenders may request additional documents, such as updated financial reports, lease agreements, and tax records. At Baton, we often assist buyers by connecting them with lenders and ensuring your business is SBA Pre-Qualified, which can make financing smoother and more efficient.

While due diligence is underway, the buyer’s attorney will begin drafting the Asset Purchase Agreement (APA). The APA is a comprehensive 30-50 page legally binding document that details the transfer of business assets, sale terms, and conditions.

You will need your attorney to carefully review the APA to ensure that the terms accurately reflect the negotiated agreement. Key sections typically include:

• Purchase price and payment structure.

• Terms for transferring assets and liabilities.

• Conditions for final closing.

The buyer’s completion of due diligence and confirmation of financing is typically required before finalizing the APA.

Once the buyer’s attorney provides the initial draft of the APA, your attorney will review it and propose any revisions. Both sides may go through several rounds of edits to ensure all terms are mutually acceptable.

When both parties agree on the final version, the APA is signed, officially concluding the due diligence phase. This agreement signifies that the buyer has secured financing and is prepared to move into the closing period, during which final ownership transfer and payment arrangements take place

Once the Purchase Agreement is signed, you’ll move into the closing phase, where the final steps of the sale are completed. Here’s what to expect:

1. Escrow and Final Payments: The buyer will deposit funds into an escrow account to ensure all payments are securely handled. This step protects both parties, as the funds are only released once all conditions of the sale are met.

2. Transfer of Assets: We’ll work with you to transfer all assets to the buyer, which may include inventory, equipment, intellectual property, contracts, and any other agreed-upon items. This is typically coordinated with your lawyer to ensure all legal requirements are met.

3. Transition Planning: You and the buyer will collaborate on a transition plan to ensure a smooth handover of the business. This might involve training the buyer, introducing them to key employees, or providing support during an agreed-upon transition period.

4. Final Closing Meeting: A final meeting will be scheduled to review all documentation, confirm that all assets and funds are ready to be transferred, and address any last-minute questions or concerns. This is often conducted through a virtual or in-person meeting with your advisor, attorney, and the buyer's team.