4 Important Stages of a Closing

To reach a successful closing, there are four important stages to keep in mind. If you are planning to sell a business, it is important to understand what the stages are from a buyer’s perspective. In this article we will take a look at these four important stages of a closing.

The Letter of Intent (LOI)

Your M&A advisor will assist you with writing the letter of intent. The letter of intent should include the price, terms, and time frame anticipated. There are other factors such as the seller’s transition and training. This agreement should also include what is included and what is not included in the deal.

Due Diligence

The purpose of due diligence is to confirm the accuracy of the information presented. Your M&A advisor will guide you through the due diligence process. This is an essential step in the closing process. All important facts and documentation should be evaluated. This ranges from tax returns and internal P&Ls to leases, bank statements, and customer/employee lists. Other areas of due diligence include the Non-Disclosure Agreement (NDA), financial statements, and credit reports.

Buyers who do not invest enough time and energy into due diligence can often have serious regrets after the deal has closed. In a typical transaction, the due diligence period will last for 45-180 days. With more complicated deals, it could last six to nine months or longer.

Financing Approval

The financing approval is your lender’s responsibility. If you need advice and insights, your M&A advisor can assist you. You may want to look into local SBA lenders or seller financing.


The final stage of the four stages of a closing is the agreement-drafting step is where your attorney will be of tremendous assistance. Your written agreement should cover a wide range of aspects. This can range from payment terms to assets and liabilities. Both the buyer and seller should know exactly what the arrangement will be.

If you follow these four stages of a closing properly, your deal should close in a timely and effective manner. The team at EBIT Associates can help guide you through the closing process.

Natee Meeplan/BigStock.com


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