The M&A Process Step by Step

01The M&A Process and Timeline

An acquisition moves through five broad stages. End to end it usually takes six to eight months, though a well-prepared company can be quicker. Here is the shape of it.

The stages overlap, and the clock is heavily influenced by your readiness. This is where the work from exit readiness pays off directly: the more pre-prepared you are, the faster you close.

02Step 1: Prepare and Get on Buyers’ Radar

The deal starts before any buyer is talking to you. Two things happen here: you get the company ready, and you make sure the right buyers know you exist.

On readiness, this is a CFO’s job to own. A good CFO keeps the company ready for everything, all the time, so that when a buyer appears the finance, the data room and the answers are already there. That readiness is not just tidy housekeeping; it closes the deal faster, which is eventually a huge monetary benefit, because the price is locked sooner and the money arrives sooner. The same logic we use in fundraising applies here: preparation buys speed, and speed is worth real money.

On reaching buyers, you can go direct if you have the relationships, or use a banker. We cover when a banker is worth it in the deal-team section below. Either way, the goal of step one is credible interest from buyers for whom your company solves a real problem.

03Step 2: The LOI and Term Sheet

When a buyer is serious, they put down a letter of intent (LOI) or term sheet. It sets out the proposed price, the structure of the deal, and the key terms, before everyone spends money on diligence and lawyers. The important thing to understand is what is, and is not, binding.

A term sheet is largely non-binding from the buyer’s side: it is a strong statement of intent to do something, not a guarantee that the deal will close. But it usually carries one binding piece: exclusivity, commonly around 90 days from the company side. During that no-shop period you agree not to take the company to other buyers, which gives the buyer the comfort to invest in diligence. So you are granting real, binding exclusivity in exchange for an intent that is not yet binding, which is exactly why the price, the structure and the length of exclusivity all matter at this stage.

04Step 3: Due Diligence

With the term sheet signed, the buyer digs in. Due diligence is a thorough examination of the company: finance and accounting, legal and corporate, tax, intellectual property, key contracts, employment and ESOP, and any litigation. This is the stage that most often slows a deal, and it is where a buyer who finds problems will try to re-trade, chipping the agreed price down or adding conditions and indemnities.

Your defence is preparation. A company that is genuinely exit-ready answers diligence quickly, cleanly and without nasty surprises, which both shortens the timeline and removes the buyer’s excuses to re-negotiate. The detail of what buyers examine is in our due diligence series; the lesson for the seller is simple: every gap you fixed in advance is a price cut you avoided.

05Step 4: The Definitive Agreements

Once diligence is substantially done, the lawyers draft the definitive agreements, principally the share purchase agreement (SPA), which replace the non-binding term sheet with binding contracts. This is where the deal becomes real, and where experienced legal counsel earns their fee. Key elements include:

• Final price and structure, including any earn-out or deferred consideration.
• Representations and warranties: formal statements about the company that, if untrue, expose you to claims.
• Indemnities: who bears the cost if something goes wrong post-deal.
• Escrow or holdback: part of the price held back for a period to cover potential claims.
• Conditions precedent (CPs): things that must happen before closing, such as approvals or clean-ups.

These terms decide how much of the headline price you actually keep, and how exposed you remain after the deal. We cover them, and the structure choices behind them, in the term sheet decoded and deal structures.

06Step 5: Signing and Closing

Signing and closing may happen together or be separated by a gap while conditions precedent are satisfied. At closing, the remaining steps are completed: any regulatory or corporate approvals, the transfer of shares (in demat form), the flow of funds, and the release of documents. Part of the price is often held in escrow and released later once the warranty period passes.

If the buyer is foreign, closing also triggers FEMA reporting such as FC-TRS for the share transfer; we cover that in acquisition by a foreign buyer. How the final proceeds are split across investors, founders and ESOP holders is its own important topic, covered in who gets what at exit, and the tax on your proceeds is in tax on a startup exit.

07Your Deal Team: Banker, Legal and Tax

You do not run an acquisition alone, and who you put around you shapes the outcome.

The banker or M&A advisor

A banker is worth it mainly if you do not have enough connections to get your company in front of the right buyers. A good one runs the process, creates competition and keeps momentum. But hiring the right banker is critical: the wrong banker can cost you six to eight months of exclusivity and effort and still not close. Choose someone with real, relevant deal experience and genuine access to buyers in your space, not just a brand name.

Legal and tax advisers

This is not the place to save money. Hire experienced legal and tax advisers and do not try to optimise on cost here. An acquisition is one of the largest financial events in your company’s life, and the downside of weak advice, a badly negotiated indemnity, a missed tax structure, a warranty you should not have given, dwarfs any fee you might save. Good advisers protect both the price you keep and your exposure after the deal.

08Frequently Asked Questions