Sell-Side M&A Process and Best Practices

Today’s highly competitive M&A landscape prioritizes well-performing businesses. The global M&A market is solidifying, owing its growth to the normalization of regulatory and monetary frameworks and simplified corporate portfolios. 

The lion’s share of M&A deals in 2025 are expected in energy, health care, media, high-tech, and telecommunications.

Often, business owners intend to sell their businesses but are not prepared to face the challenge. Few fully comprehend the nature of the sell-side process.

In these realms, we emphasize the importance of the sell-side M&A process in shaping the best deals. We primarily focus on robust preparation and a strategic approach to sell-side transactions. 

Our new article explores the nuances of the sell-side M&A and its role in mergers and acquisitions. We highlight the following essential points:

• Key differences between the sell-side M&A and buy-side M&A
• The stages in the sell-side M&A process
• Challenges and risks associated with sell-side M&A
• Best practices to mitigate sell-side M&A risks
• The role of VDRs for sell-side M&A

What is sell-side M&A?

Sell-side M&A is about motivating buyers to acquire new businesses for an optimal cost. The sell-side M&A process strategically maximizes shareholder value and ensures smooth transactions. 

Maximizing shareholder value

The sell-side maximizes shareholder value by: 

• Analyzing corporate financials
• Reviewing financial statements
• Doing equity research
• Spotting potential risks and liabilities 
• Arranging marketing materials
• Forecasting potential earnings 

This data is essential for determining the company’s fair market value and negotiating its price.

By working with potential buyers, the sell-side team expects a decent premium for selling at the highest possible price.

Achieving smooth transactions

Sell-side teams conduct due diligence and promote open communication among stakeholders. Employing these professionals is vital to ensure successful transactions by incorporating the following:

• Negotiating the transaction terms
• Navigating regulatory requirements
• Managing the due diligence process

Sell-side M&A vs. buy-side M&A 

In mergers and acquisitions (M&A), transactions involve two key sides: the sell-side and the buy-side. Understanding the roles, objectives, and strategies of each side is crucial for successful deal execution.

Sell-side M&A

On the capital markets, M&A sell-side professionals represent corporations to raise capital by selling and trading securities. If a business wants to sell one of its companies, it contacts its investment banker to issue debt or equity. Further, sell-side investment banking performs meticulous financial market modeling analysis and due diligence to generate interest among potential buyers in the company’s value. 

Detailed financial statements are then shared with the buy-side companies. With that, the sell-side issues and distributes securities to meet corporate financing needs.

Sellers:

• Analyze indexed companies
• Advise businesses on M&A transactions
• Value businesses 
• Offer deals to buyers 
• Help clients acquire assets
• Issue debt and equity
• Make listed securities more liquid
• Promote and ensure the sale of securities

Buy-side M&A

The buy-side M&A involves buyers who want to acquire other businesses. In this pursuit, they raise investors’ funds and decide on the best investment opportunities. The buy-side M&A emphasizes purchasing and investing in securities to manage corporate funds. This way, buyers generate investment returns and operate client portfolios.

The buy-side companies and institutional investors operate with sufficient amounts to purchase securities issued by the sell-side entities, including bonds, derivatives, and shares.

Buyers:

• Assign institutional investors
• Analyze clients’ finances
• Achieve zero-risk return on funds
• Conduct financial analysis and valuations
• Explore investment and financing opportunities
• Raise capital to manage and boost assets under management
• Manage investments

Successful M&A transactions depend on the smart deployment of the best virtual data rooms (VDRs).

Participants in a sell-side process 

A successful sell-side M&A transaction involves multiple stakeholders, each playing a critical role in facilitating a smooth and efficient deal. From financial valuation to legal compliance, these experts ensure that the selling company secures the best possible terms while minimizing risks. Below are the key participants in a sell-side process and their responsibilities.

Investment bankers

• Share M&A sell-side models with potential business buyers
• Estimate the company’s market value 
• Identify potential buyers
• Negotiate win-win terms by soothing complex issues like earnouts, indemnification clauses, and non-compete agreements
• Conduct due diligence
• Structure M&A deal processes to mitigate taxes and transition smoothly
• Achieve smooth transactions

M&A advisors 

• Secure the most beneficial sale terms for the target company
• Evaluate offers
• Identify strengths and weaknesses before negotiations
• Spot the toughest parts of the M&A process
• Assist in due diligence and prepare for negotiations by gathering crucial data to detect potential issues
• Determine potential buyers and negotiate win-win terms like purchase price, payment structure, and post-closing requirements

Sell-side research analysts

• Evaluate companies 
• Advice on stocks and securities
• Research equities 
• Estimate future earnings

M&A brokers

• Provide all the necessary M&A support from the get-go 
• Arrange sales documents 
• Find and negotiate with potential buyers 
• Close M&A transactions

Legal advisors

• Facilitate the M&A process 
• Assist in due diligence
• Review legal documents, regulatory requirements, and approvals
• Draft the purchase agreement 

Financial advisors

• Structure the deal to mitigate taxes and ensure the most favorable terms.

Other intermediaries, like equity research analysts, may be involved at various stages of the sell-side M&A process. 

Key stages in the sell-side M&A process

While acquisitions rank high on today’s corporate agenda, the sellers must also properly prepare for the sale process. 

Sell-side M&A stage	Description
Setting the motivation	The primary question to ask is why someone would buy another company. M&A sellers should set a motive to make potential buyers want to buy it. M&A sellers prioritize steady and growing cash flows that no company can achieve individually.
Valuing the target company	Objective estimation of one’s business value is crucial before seeking potential buyers. Sell-side analysts deploy discounted cash flow (DCF) analysis to estimate growth projections and assess whether the company’s valuation is attractive. Assessing the target company value, the sell-side teams analyze financial statements and market trends to set a fair price range. Investment bankers accurately value the company with commonly applied approaches like discounted cash flow or the market multiple method.
Writing a sales memorandum	This marketing document serves as a disclosure to inform buyers about the company being sold and helps to determine the investment opportunity. A well-prepared sales memorandum is a sound way to maximize shareholder value and attract serious buyers. Beyond the company’s strengths, like its core products or services, growth prospects, and competitive edge, the memorandum is an objective revelation to the buyers about all the risks or challenges the target company copes with.
Identifying potential buyers	This stage is essential for the sell-side M&A and starts with exploring the closest competitors, strategic investors, and private equity firms. An expanded professional network helps to analyze investment bankers and business brokers. The core criteria in identifying potential buyers involve their financial potential, strategic match, shared cultural values, and market reputation.
Working on the initial contact	The sell-side M&A team weighs the best offers from potential buyers.
Signing a confidentiality agreement	The sell-side representatives sign a non-disclosure agreement (NDA) agreeing to keep sensitive information about the target company confidential.
Arranging management presentations	Once a potential buyer is interested, the buy-side analysts arrange management presentations to explore the target company’s operations and financials.
Conducting due diligence	A sell-side edge is about going the extra mile with due diligence. The process helps businesses identify and evaluate a company’s value.  Sell-side due diligence reveals the strong and weak points crucial for buyers.  Due diligence verifies essential information and helps buyers detect inconsistencies and potential risks.
Negotiating a deal	Investment bankers are experienced negotiators with robust M&A knowledge and a vested interest in continuing the negotiation process until their client is satisfied. Following due diligence, the parties negotiate the terms and deal structure until a final agreement is reached.  The analysis of tax implications of the sell-side M&A process on the deal structure will help maximize after-tax proceeds.
Closing the M&A transaction	Once the parties have agreed on all terms, the transaction is closed. The sell-side transfers the company’s funds and other assets and signs final contracts.

Challenges and risks in sell-side M&A

While potential M&A risks and challenges arise from case to case, sell-side entities often face three common issues. 

Confidentiality

Considering the high priority of confidentiality in M&A and investment banking deals, the sell-side team should develop a robust confidentiality policy and uncompromised adherence by all parties. 

Beyond its initial stages, the M&A process extends with new participants and intersections, meaning that it is crucial to maintain a sound level of confidentiality among all stakeholders throughout the transaction. In this vein, information flows should be managed among the involved participants.

A sound confidentiality policy should entail any possible breaches, including legal remedies like non-disclosure agreements.

Key employees

To maintain business integrity, employee retention is essential for a successful M&A transaction. Once the sell-side loses its key employees, it lacks institutional knowledge and is prone to disrupted operations. 

Regulatory requirements

Navigating regulatory requirements is crucial to ensure compliance. Depending on jurisdictions and local legislation, it is often hard for businesses to obtain necessary approvals and licenses.

The regulatory compliance process is essential at the early stages of the M&A process. Oftentimes, regulatory hurdles cause delays and distract the smooth transaction proceeds. 

Beyond regulatory compliance, there are often key differences between the seller and the buyer, like business practices, organizational culture, and communication approaches. 

Best sell-side M&A practices

To ensure a smooth sell-side M&A process, businesses invest in competent teams to assist them.

Competent advisors

With their multiple roles, professional advisors possess essential knowledge and skills to guide businesses through the M&A process. Most importantly, these intermediaries help business owners make informed decisions. 

The optimal choice should target advisors with a solid track record and sufficient M&A experience. 

Realistic expectations

Successful M&A transactions depend on setting reasonable expectations. While most businesses want to close the deals as soon as possible by skipping due diligence, it’s vital to approach the process as a lengthy and complex endeavor. 

In reality, the M&A process involves lengthy negotiations between the parties. For instance, the sell-side’s estimate of the company value may exceed its real market worth, or the buy-side firms may not agree on some post-purchase terms. 

Close collaboration with sell-side M&A advisors allows businesses to plan and structure the process. Realistic milestones and timelines provide the discipline to soothe and close M&A deals.

Flexibility and communication

Flexibility entails a win-win approach and openness to fluctuations and possible changes underway. It’s important that the negotiators from both sides of the deal keep an open mind and that each other achieves their goals from the M&A transaction.

Maintaining open lines of communication between the parties helps build relationships, ensure mutual trust, and achieve a successful outcome.

Using VDRs for sell-side M&A

Virtual data rooms (VDRs) are crucial for streamlining sell-side M&As. The M&A process is often overwhelmed with an abundance of documents “heavy lifting.” Virtual data rooms help sellers and their intermediaries access controlled data through all the stages of M&A transactions. 

M&A sellers leverage VDRs as private cloud-based repositories to set user permissions, manage files and documents, protect the integrity of the contents, and ensure safe data sharing. Once a virtual data room is configured, the sell-side provides access to the stakeholders, including intermediaries, authorized third parties, and potential buyers. Given the accessibility of private data, the sell-side owner is responsible for granting access to other parties involved.

While the sell-side M&A business should deliver information on the target company to the buy-side, there’s no better option than setting up a virtual data room.

The sell-side VDR process 

1) Make an internal research folder embracing the sell-side M&A process, sell-side management team, and all contracted intermediaries.

2) Make a folder outlining the initial work done to launch the sales process:

• A sales memorandum
• A teaser
• Target company’s valuation.

3) Split the company’s details into separate folders, including: 

• Employment documentation
• Financial documentation
• Legal documentation 
• Operational documentation.

4) Enable access to the sell-side team with feedback and add-on options.

5) Enable access to the core buyers based on confidential information memorandums and NDA agreements.

Conclusion

The sell-side M&A is often overseen. Business owners skip the essential process to sell their companies sooner. They barely invest in competent intermediaries (sell-side M&A) to facilitate win-win deals. 

The sell-side M&A process starts with preliminary preparation and determining strategic goals for the sell-side transactions. For this purpose, we embraced the key actors, stages in the sell-side M&A process, core risks and challenges, and the best practices to run sell-side M&A smoothly.

While the M&A process relies on VDRs, tech-savvy advances streamline the process and save parties from an abundance of time and resource inefficiencies. 

FAQ

What is the difference between sell-side and buy-side M&A?

M&A sell-side teams help businesses sell their companies for the highest sale price. The sell-side M&A issues debt or equity, and dives into meticulous financial modeling and due diligence to spark interest among potential buyers. 

The buy-side M&A consists of buyers interested in purchasing companies. For this purpose, they elaborate on well-informed investment opportunities. The buy-side M&A prioritizes security investments to manage corporate funds, including mutual funds, pension funds, and hedge funds. 

How long does a sell-side M&A process typically take?

On average, the process lasts from six to nine months, depending on jurisdiction and regulatory issues. 

What documents are needed for sell-side M&A?

Before contacting potential buyers, the sell-side M&A team should prepare three years of financial statements, a sales memorandum, company valuation estimates, and due diligence documentation.

How can a virtual data room help in the sell-side process?

Virtual data rooms help the sell-side teams manage and share documents, set up access controls, and protect the information from unauthorized third-party access, especially confidential and sensitive data. 

What are the key factors to consider when choosing an advisor for sell-side M&A?

Professional competence, high communication capacity, and hands-on market experience in the target company’s niche.