The sell-side advisory process, from mandate to close

The information memorandum is the document that does the selling, and it is built long before a single bidder sees it. Drafting starts with vendor due diligence: an internal audit of the financial, legal, commercial and tax position of the business, run by the adviser and the vendor's own accountants and lawyers, with the specific purpose of finding the problems before a bidder does. A contract with an unassignable change of control clause, an unresolved employee entitlement, a customer concentration that looks fine in the trading numbers but concerning under diligence: all of this needs to be identified and, where possible, remediated or explained before the memorandum goes out, not discovered mid process when it can be used to reprice the deal.

The memorandum itself typically covers:

None of this reaches the market in one release. An anonymised teaser goes to a longlist first, testing appetite without disclosing identity. The full information memorandum follows only once a non-disclosure agreement is signed, and the data room opens only after an indicative bid is on the table. Staging the release of information is a control mechanism as much as a courtesy: it protects the vendor's competitive position if the process does not complete, and it means the parties who reach the data room have already committed enough to be worth the vendor's time.

A credible sale process runs to a process letter, not to whichever bidder calls most persistently. The process letter sets the timetable, specifies what an indicative, non-binding offer must address (price, structure, funding source, conditionality, timeline to binding documentation), and states the basis on which parties will be shortlisted. Running parallel tracks, rather than negotiating exclusively with a single party from the outset, is what preserves the vendor's negotiating position. A bidder who believes it is the only party at the table has little reason to sharpen its price or soften its conditions.

The adviser's job through this stage is largely one of information control and pace management: enough detail released to each party to keep genuine bidders engaged, enough discipline in the timetable that the process does not drift into a single protracted negotiation, and enough visibility into each bidder's actual capacity to fund and complete that the vendor is not carrying a party who was never going to reach the table. A first round narrows a longlist to a shortlist on indicative price and credibility. A second round, with deeper data room access, narrows the shortlist to the party or parties invited to binding documentation.

Diligence is where deals are actually won or lost on detail rather than headline price. A well run data room is structured by workstream (financial, legal, commercial, tax, and where relevant technical or environmental), access is staged to genuine bidders only, and every question raised through the question and answer log is tracked and answered on the record so that the same information reaches every party still in the process. Management presentations are scheduled and prepared rather than ad hoc, because an unprepared answer to a diligence question can move a bidder's valuation more than a line item in the accounts.

Exclusivity is the point of maximum leverage transfer, and the adviser's role is to resist granting it before it is earned. A bidder who wants exclusivity before submitting a firm offer is asking the vendor to absorb the market risk of a process on hold while the bidder tests price. Where exclusivity is granted, it should be short, tied to specific milestones, typically completion of confirmatory diligence and delivery of an execution ready term sheet, and paired with a mechanism to end the exclusivity period if the bidder does not perform to timetable.

The term sheet, sometimes styled heads of agreement, is where the commercial architecture of the deal is fixed before lawyers begin drafting the sale agreement. The core mechanics to settle at this stage include the price mechanism, whether a locked box priced off a set balance date or completion accounts adjusted after settlement, the treatment of working capital and net debt, the structure of warranties and indemnities and whether they will be backed by an escrow, a retention, or warranty and indemnity insurance, and any restraint of trade the vendor will accept post completion.

Getting these mechanics right in the term sheet matters more than getting the headline price right, because an imprecise price mechanism or an open ended indemnity can erode the effective consideration long after signing. A term sheet that leaves the completion accounts methodology to be worked out later is not a favour to either side. It is a dispute deferred to the point where the vendor has the least leverage to resolve it.

Between a signed sale agreement and completion sits the conditions precedent schedule, and it is the adviser's job to trace every condition to a document and a signatory, not to a hope that it will sort itself out. Typical conditions in an Australian trade sale include:

Each condition is tracked against a responsible party and a satisfaction document, whether that is a certificate, a consent letter, or a regulatory approval notice, and the tracker feeds directly into the closing memorandum: the master document that lists every action, document and signatory required on completion day, in the order they must occur. Settlement mechanics, the sequencing of the funds flow, and the release of any escrow are all fixed by that memorandum before completion, not improvised on the day. Closing memorandum discipline is what separates a completion that takes an hour from one that takes a week of chasing signatures.

None of these stages exist for their own sake. A conflict screen protects the integrity of the advice. A properly staged information memorandum protects the vendor's negotiating position. A competitive process protects price. Disciplined diligence protects against post completion disputes. A precise term sheet and conditions precedent schedule protect the value that has already been agreed from eroding between signing and completion. The sell-side mandate that runs to this discipline, from the first conflict check to the last signature on the closing memorandum, is the one that closes on the terms it started with.