Selling to private equity: what actually happens, start to finish

Selling your business to a private equity group follows a surprisingly standard path. First come a few friendly phone calls. Then a confidentiality agreement, and you share high-level numbers. Then a written offer called a letter of intent, which sets a price and takes you off the market while the buyer digs through everything: your financials, your customers, your contracts, your trucks. If the digging confirms what you told them, you sign final agreements, and on closing day the money hits your account. Transaction timing varies widely with preparation, diligence, financing, and negotiation. Not weeks. Months.

Here's why the road map matters. The group across the table has walked this road dozens of times. You will walk it once, probably with the biggest asset you own. Buyers don't win by cheating; they win because they know where every pothole is and you don't. This page walks you through each stage in plain English, including the uncomfortable parts: what due diligence really feels like, why deals fall apart late, and how buyers sometimes lower the price after you've shaken hands on it. Read it once and you'll know more about the process than most owners do on the day they sign.

The road map at a glance

• First contact and early calls. Timing depends on the seller's objectives, preparation, and the buyer's process.
• NDA and high-level numbers. A confidentiality agreement, then revenue and profit in broad strokes.
• IOI or LOI. A written price and terms. An LOI may include a binding exclusivity provision. Review the stated restrictions, duration, exceptions, and termination rights before signing.
• Due diligence. The buyer verifies financial, legal, tax, commercial, and operating information over a negotiated period. The dossier does not establish a typical number of days.
• Quality of earnings. An outside accounting team tests whether your profit is real and repeatable.
• Final agreements. Lawyers turn the LOI into a binding purchase agreement.
• Closing day. Signatures, wire transfers, and the handoff begins.

Now let's take each one slowly.

First contact and the getting-to-know-you calls

It usually starts one of two ways. Either a buyer reaches out to you, with a letter, an email, or a call from someone whose whole job is finding owners like you, or you decide it's time and start the process on your terms. If a letter has already landed in your mailbox, read our guide on handling an unsolicited offer before you reply. The short version: be polite, be unhurried, and don't hand over numbers to a stranger.

The early calls are friendly and low-key, and that's by design. They'll ask about your story, your team, your market, your reasons for thinking about a sale. They're doing two things at once: genuinely learning the business, and sizing you up. How badly do you want out? Do you know what the business is worth? Is there anyone advising you? Your answers to those unspoken questions shape every number that comes later. There's nothing wrong with these calls. Just know that "we're just getting to know each other" is also the opening move of a negotiation.

A word of calm here: nothing in this stage commits you to anything. You can talk to a buyer, learn a lot, and walk away. Plenty of owners do exactly that, more than once, over several years.

The NDA, and what you share early

A best practice is to put a mutual NDA in place before sharing confidential information, with counsel reviewing its scope and exceptions. It's a short contract saying the buyer keeps your information confidential and doesn't use it against you. Sign one before sharing anything sensitive, and have a lawyer glance at it. Look for how long it lasts and whether it stops them from poaching your employees. A serious buyer expects an NDA and won't blink.

With the NDA in place, you share high-level numbers: a few years of revenue, profit, and the basic shape of the business. Not tax returns, not customer lists, not payroll detail. Broad strokes. The buyer uses this to decide whether to make an offer and roughly what to pay. This is also where the profit conversation starts, usually around EBITDA, which is earnings before interest, taxes, depreciation, and amortization. In plain English, it's the profit the business throws off before financing costs and paper deductions. Buyers price businesses as a multiple of that number, so how it gets calculated matters enormously. If you want to understand that math before a buyer does it for you, read how private equity values a business.

The offer: IOI, then LOI

In a larger or more competitive process you may first get an IOI, an indication of interest. It's a soft, written "we'd probably pay somewhere around this much," used to narrow the field. Many deals with a single buyer skip it and go straight to the main event: the LOI.

The LOI is the letter of intent, and it's the most important document in the whole process before the final contract. An LOI commonly outlines proposed economics and process terms. Binding and non-binding provisions depend on the document, so qualified counsel should review it before signature. The buyer can still walk away or change the number. But one piece usually is binding, and it's called exclusivity. By signing, you agree to stop talking to any other buyer, for a negotiated period, while this one does their homework.

Think about what that trade means. The moment you sign, your alternatives disappear and your negotiating strength drops. Which means the moment before you sign is your point of maximum leverage. That's when you push on price, on structure, on what happens to your people, on everything. Owners who treat the LOI as a formality and plan to "negotiate the details later" learn the hard way that later never favors the seller. Get the second opinion before you sign, not after.

Due diligence: why it feels invasive

Once the LOI is signed, due diligence begins, and this is the stage nobody warns owners about. The buyer's team, plus their accountants, lawyers, and insurance people, will go through essentially everything: bank statements, tax returns, job costing, customer concentration, service agreements, vehicle titles, leases, permits, licenses, employee records, workers' comp history, warranty claims, even your software subscriptions. You'll upload hundreds of documents to a secure online folder called a data room, and the request lists just keep coming.

It feels invasive because it is. But it helps to understand why. The buyer is about to wire you a life-changing amount of money for a promise: that the business earns what you say it earns and will keep earning it after you're gone. Diligence is them testing that promise from every angle. A buyer who digs hard isn't insulting you. A buyer who doesn't dig at all should worry you more.

Two honest warnings. First, diligence is exhausting, and you still have a business to run while it's happening. Owners who try to do it all personally often let the business slip in exactly the quarter the buyer is watching most closely. Lean on your bookkeeper, your CPA, and your advisor. Second, everything you claimed early gets checked. If you rounded up, guessed, or forgot something unflattering, it will surface here, and surprises at this stage cost real money. The single best thing you can do, even years before a sale, is keep books clean enough that there's nothing to find.

The quality of earnings review, in plain English

Inside diligence sits one exercise that deserves its own explanation, because it moves the price more than anything else: the quality of earnings review, often shortened to QoE. A buyer may engage an accounting provider to assess whether reported earnings are supportable and sustainable. As CLA puts it, an audit asks whether the numbers are accurate, while a QoE asks whether earnings are sustainable.

The reviewers rebuild your numbers from the ground up using bank statements, invoices, and payroll records. Then they adjust. That one huge install job that won't happen again gets pulled out. The truck your spouse drives, the hunting lease, the cousin on payroll who doesn't really work there: personal expenses get added back or stripped out depending on which way they cut. The analysis may produce a buyer-adjusted EBITDA calculation. It is a diligence position that can be reviewed, supported, and negotiated, not a uniquely true number. Since the price is a multiple of that number, every dollar the QoE moves it swings the price by several dollars.

Here's the thing most owners don't know: you don't have to walk in blind. Sellers can commission their own version of this review before going to market. It costs money, but it means you learn about the problems first, fix what's fixable, and defend your number with the same kind of report the buyer's team respects. In a negotiation where their side has an accounting firm and your side has a shoebox of receipts, guess whose number wins.

Final agreements and closing day

If diligence confirms the story, the lawyers take over. The LOI becomes a purchase agreement, a long, binding contract that covers the price, what exactly is being bought, and who's responsible if problems surface after closing. You'll hear the term "reps and warranties," which are the formal promises you make about the business being what you've presented. Alongside it come your employment or consulting agreement if you're staying on for a transition, a noncompete, and the documents for any part of the price that isn't cash at close. Sale-of-business noncompetes are governed by the transaction documents and applicable law. The FTC states that its federal Noncompete Rule is not in effect and is not enforceable. The definitive-document stage varies with transaction complexity, diligence findings, financing, approvals, and negotiation. Don't use your real estate attorney. Use someone who does business sales for a living.

Closing day itself is quieter than you'd expect. There's no ceremony. Documents get signed electronically, the wire hits your account, and a business you may have spent thirty years building changes hands before lunch. Most owners describe the same mix of relief, pride, and a strange hollowness. That's normal. What life looks like on the other side, for you, your name on the door, and your people, is its own subject, and we've written about it in what happens after private equity buys your company.

What happens to the money

The headline price and the check that clears on closing day are rarely the same number. A private equity offer may include cash at closing and one or more deferred or contingent components. The mix varies by transaction:

• Cash at close. The money wired on closing day. The least contingent component, before escrow, debt, fees, taxes, working-capital adjustments, and other deductions.
• Rollover equity. Part of your price converted into ownership of the buyer's larger company. If they grow it and sell it well, that stake can be a second payday. It can also end up worth little. You're an investor now, not just a seller.
• An earnout. Money paid later only if the business hits agreed targets after closing. The catch: you no longer control the decisions that determine whether it hits them.
• A seller note. You act as the bank for part of the price, and the buyer pays you back over time with interest.

None of these structures is automatically bad. Owners have done very well on rollover equity, and earnouts sometimes bridge an honest gap between what you believe and what the buyer can prove. But the mix matters more than the headline. A bigger number with a small cash portion can be a worse deal than a smaller number paid mostly at close. We break down each structure, and the questions to ask before agreeing to any of them, in rollover equity, earnouts, and seller notes.

Where deals die, and where they get retraded

Now the honest section. Some signed LOIs do not make it to closing, and owners deserve to know why before they start.

Deals die in diligence. The usual killers: profit that doesn't hold up under the QoE, one customer who turns out to be a third of revenue, messy books that can't answer basic questions, licenses or permits that aren't in order, and a business that visibly can't run without the owner. Deals also die of exhaustion, when a worn-down seller facing the fourth document request list simply quits. And sometimes the buyer's own situation changes: their financing, their fund, their appetite. Not every dead deal is the seller's fault.

And then there's the retrade. Retrading is when a buyer uses something found in diligence to lower the price late in the process. "We found some issues in the numbers, so we can now only pay this." Sometimes the finding is real and the adjustment is fair. Sometimes it's a tactic, used precisely because the seller is exhausted, emotionally committed, months into exclusivity, and has no other buyer waiting. The buyer is betting you'll swallow a lower number rather than start over. It's a bet that too often pays.

Prepared owners avoid most of this, and the playbook isn't complicated. Clean, verified financials before you go to market, so there's nothing to find. Your own quality of earnings work, so your number is defended by professionals. Ugly facts disclosed early, on your terms, because a surprise in month four costs triple what an honest disclosure in month one does. An LOI negotiated hard before exclusivity begins, ideally with more than one buyer interested so walking away stays a live option. And someone in your corner who has seen retrades before and can tell you, calmly, whether this one is legitimate or theater.

The timeline, honestly

There is no dependable universal timeline in the dossier. Preparation, diligence, financing, regulatory review, negotiation, third-party consents, and the condition of the seller's records can all affect timing. Complicated businesses, messy books, or licensing transfers can stretch it further. Treat any compressed schedule as a proposal to verify, including its diligence scope, financing, conditions, approvals, and required consents.

And the real timeline starts even earlier. The things that add the most to a sale price, clean books, a team that runs without you, a customer base that isn't three big accounts, take years to build, not months. That's why the best time to understand this process is long before you're in it. and the owners who come out ahead will be the prepared ones, not the lucky ones.

Preparation starts before a process begins. Run your free Exit Score to understand the value drivers a buyer is likely to test and the areas you may be able to strengthen on your own timeline. If you are already fielding buyer outreach, bring our questions to ask a private equity buyer to the next conversation.