Thinking About Selling Your Startup? Get Deal Counsel Involved Earlier Than You Think

A buyer calls. They like your product, your team, and your numbers, and they want to talk about acquiring your company. That call is not the time to start getting ready. By the time a buyer is at the table, your cap table, IP assignments, and customer contracts are already baked, and the buyer’s diligence team will pick through every one of them. Problems you find first are cheap to fix. Problems the buyer finds turn into price cuts, bigger escrows, and special indemnities, or worse, a busted deal.

Our advice: bring in deal counsel with real M&A experience 12 to 18 months before you go to market. Here’s what that runway should look like.

12 to 18 Months Out: Clean your House

This is the cleanup phase. The goal is simple: when a buyer opens your data room, nothing in it should surprise them.

• Clean up the cap table. Reconcile every option grant, SAFE, and convertible note against your board approvals and 409A valuations. Missing consents and handshake equity promises are classic diligence findings.
• Get your financials buyer-ready. Work with your accountant on clean, consistent financial statements. Many buyers will commission a quality of earnings review, and messy books cost you leverage.
• Track the KPIs buyers care about. Metrics like revenue growth, retention, churn, customer acquisition cost, and gross margin drive valuation and shape how a buyer prices risk. Start tracking them consistently now so you have a credible history to show.
• Fix the issues buyers will flag. Think unsigned IP assignment agreements, NDAs and restrictive covenants that are missing or unenforceable, and customer contracts with change of control or anti-assignment provisions that could let a key customer walk at closing.
• Bring in experienced deal counsel. You want a lawyer who has run mid-market M&A deals and knows startups, so the cleanup targets what buyers will actually test.

Leaving these steps until a deal is at your doorstep adds unnecessary stress and work to your plate at a time you’re about to have two full-time jobs.

3 to 9 Months Out: Get Real About Value and Line Up Buyers 

As you get closer to market, the questions shift to what your company is worth and who is most likely to pay for it.

Be realistic about valuation. If you’re working with an investment banker or M&A advisor, they’ll lead on price and the buyer list. Your deal counsel’s job is to make sure the headline number holds up. Purchase price is only part of the story. Escrows, holdbacks, earnouts, working capital adjustments, and indemnification caps decide how much of that number actually reaches you and your investors. Know your positions on those terms before the first LOI lands.

Start the Clock Before a Buyer Does 

Whether you’re 18 months from a sale or fielding inbound interest right now, the work you do before signing an LOI shapes the deal you get. Our startup and M&A attorneys can help you clean up your house, plan the process, and get your company ready for a successful sale. Contact Triumph Law today.

This is the stage where an investment banker can often help drive a competitive process, bringing more buyers to the table and maximizing deal value. We can help you find one of those too!

Source:

kpi.org/kpi-basics/