What a Buyer Actually Does Between the Handshake and the Money

Nothing in this stage will raise your price. Everything in it can lower it.

Once you have agreed a number, the buyer earns the right to go verify it. Their team spends the next several weeks looking for the distance between what your company is and what your own description of it said. Every piece of distance they find is an argument to pay less, and the arguments get easier to make as they accumulate.

No new value is created after the handshake. The period exists to protect value that was already won, and more sales die here than anywhere else in the process. The buyer’s name for it is due diligence.

Three teams, three different questions

The accountants ask whether the earnings number holds. They take your adjusted earnings apart one line at a time, test how and when you recognize revenue, look at working capital, then rebuild the number themselves out of your general ledger. They are not auditing you. They are building a competing figure and comparing it to yours.

The lawyers ask who owns what, and what is owed that nobody wrote down. Equity, intellectual property, liens, litigation pending or merely threatened, consents buried in contracts nobody has read in years, and whether anything in your files contradicts a promise you are about to sign personally.

The operators ask whether the business works the way it was described. Customer concentration, the pipeline, how the thing actually gets made or delivered, what the systems do, and whether your people are as good as the document said.

The list is long no matter how ready you are

A full request list runs into the hundreds of items: formation and ownership, products and what protects them, customers, suppliers, facilities and leases, management and employees, five years of financial statements and five years of tax returns, and a public record search in every state you operate in.

Five things set its length, and you control none of them. Your size, what kind of company you run, how well the buyer already knows your industry, how the deal is structured, and what they are paying with.

You control one thing, and it is not the length. It is how long you spend on the list, how much of it lands on you personally, and how many of your answers arrive looking assembled under pressure.

The two-day test

If a buyer asked tonight for a schedule reconciling your three largest customers’ revenue to the general ledger for the last three years, how many days would it take?

A week or more is the gap they are going to find, and it will cost you more than the week. Two days is better than most companies manage. Now ask who produces it while you are also running the business and answering the other four hundred requests.

Around ninety days, and what decides where you land

The window is something you agree to before this starts rather than something you discover inside it. Around ninety days, shorter or longer, and readiness is what moves it.

Illustrative. An owner of a pet-nutrition subscription brand had built her adjusted earnings month by month for two years before going to market, with a document behind every line and her revenue recognition reviewed by her own accountant first. The buyer’s team came back inside four weeks, within half a percent of her figure. The price never reopened.

That is what the short end costs, and it was paid long before the handshake.

A problem you found is a problem. A problem they found is a number.

Illustrative. A uniform and linen rental company’s largest customer, a regional hospital system at a little over a fifth of revenue, had been with it nine years on a contract neither side had read in six. It carried a change-of-control consent: the hospital could terminate on forty-five days’ notice if the company changed hands. She had not known it was in there.

Her advisor found it during preparation, a year before any buyer existed. They went to the hospital’s supply chain office, explained that a transition was being planned eventually, and came away with a signed consent and a two-year renewal. When the buyer’s attorneys found the clause, which took them about an hour, the consent was already in the file next to it.

A buyer who finds that clause unresolved does the math instead. A fifth of revenue with a forty-five-day exit, discovered while you are off the market and talking to one party, is a reason to cut the price, a reason to hold a piece of it back, and a reason to read every other contract in the company looking for the next one.

What getting it wrong costs

Illustrative. An equipment-leasing company’s books were in good order and the business looked clean. The public record search came back with UCC filings securing a shareholder loan nobody had disclosed, in two states the company no longer operated in. The sale did not close.

The owner lost more than the sale. They had been off the market for the length of the exclusivity, the other interested parties had moved on, and the buyer, their advisors, and their lenders all now knew what the search had turned up. Whatever they ran next started from there.

The same search, run on your own company before anybody else gets the chance, turns that into a private problem with time to fix it.

More on this: What a Buyer Asks For First, and What Being Slow Costs You; What Your Financial Statements Have to Be Before a Buyer Will Believe Them.

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This is what we do. Prism Edge runs this period: one party holding the schedule, deciding which request goes where, holding the buyer to the stages that were agreed, and settling findings as they surface instead of letting them stack into a repricing. The searches get run on you first, while a finding is still yours. And the owner stays free to run the company, which matters because a missed quarter in the middle of this reopens the price without anybody having to find anything at all.

The full chapter on what the buyer’s team is looking for, and what each finding does next, is in The Business Sale, free to download here.