The Sell-Side M&A Process

In interviews, it’s essential to have a solid grasp of the M&A sell-side process. In simple terms, an investment banker supports a company in two key scenarios:

- When it wants to acquire another business, the banker acts on the buy-side (advising on acquisitions).

- When shareholders decide to sell the company, the banker works on the sell-side (advising on the sale).

In this second case, the bank’s role is to organize an auction-style process to find the best buyer. Let’s break down the main stages of a typical sell-side process: preparation, buyer outreach, due diligence, and negotiation.

Step 1: Preparing the Documentation

The first phase is all about gathering and structuring information on the company. The bank prepares documents to present to potential buyers, usually in two stages:

The Teaser

The Teaser is a short introductory document, usually no more than ten pages. It often remains anonymous, meaning the company’s name is not disclosed. Its only purpose is to spark the interest of potential acquirers hence the term “teaser.”

This document is sent to all parties that the bank has identified as potential buyers, even those only loosely connected to the target.

The Information Memorandum (IM)

The Information Memorandum often shortened to “Info Memo” or IM is much more detailed and can run over 100 pages. It contains extensive, often confidential, information about the company.
Only those buyers who have signed a Non-Disclosure Agreement (NDA) after receiving the Teaser are granted access. This ensures confidentiality while giving serious buyers the chance to evaluate the opportunity in depth.

In practice, junior bankers (analysts and interns) spend much of their time creating these documents, usually in the form of PowerPoint presentations.

Step 2: Contacting Potential Buyers

Once the documents are ready, the bank begins sharing them with selected acquirers and answering preliminary questions. Buyers typically fall into two categories:

- Strategic Buyers (Industry Players): Companies in the same or adjacent sectors that aim to expand market share, diversify their product offering, acquire new customers, or integrate part of the value chain.

- Financial Buyers (Private Equity Funds): Investment funds looking to acquire, improve, and later resell the business at a higher value.

The Teaser goes to all identified buyers, while the IM is reserved for those who signed the NDA.

At the end of this phase, the most interested parties submit a Letter of Intent (LOI). Though non-binding, the LOI outlines key elements such as price range, strategic rationale, and financing approach. Based on these, the bank (together with the client) selects a shortlist of bidders to move forward.

Step 3: Due Diligence

The third stage involves giving shortlisted buyers the chance to thoroughly assess the target. This due diligence phase provides them with access to key information through several channels:

- The Data Room: A secure online repository containing financial statements, legal documents, contracts, and other operational details.

- Vendor Due Diligence (VDD) Reports: Prepared by the seller’s advisors to reassure buyers. For instance:

- Audit firms (e.g., EY, PwC, KPMG, Deloitte) may produce financial VDD to validate historical numbers and highlight risks (often led by Transaction Services teams).

- Law firms may provide a legal VDD to review contracts and compliance issues.

- Strategy consultants (Bain is a leader here) may deliver a strategic VDD analyzing the market, competitive landscape, and growth opportunities.

- Management Presentations: Meetings where the target’s leadership team answers buyers’ questions.

At the end of this stage, buyers can submit a binding offer, unlike the earlier LOI.

Step 4: Negotiation with the Selected Buyer

The final stage is negotiating the legal documentation with the chosen buyer. At this point, the seller usually grants exclusive negotiations to the bidder with the most attractive offer.

The main contract is the Share Purchase Agreement (SPA), which defines the purchase price and key terms of the deal (ownership percentage, financing, conditions, etc.).
In some cases, a Shareholders’ Agreement (SHA) must also be negotiated—particularly if the sellers retain a minority stake in the company after the transaction.

Once both parties sign these agreements (signing) and any outstanding conditions are met, the buyer transfers the funds to the seller. This final step is called the closing of the deal.