Get ready before a buyer sets the timetable
Two tools we use with owner-led companies: the diligence list a buyer's counsel will send you, and the six events your operating agreement has to answer before one of them happens.
Sell-side tool
Are you ready for a buyer's diligence list?
This is the request list a buyer's counsel sends in the first week. Tick what you could produce today. Anything you cannot is a term you will negotiate later, from a weaker position.
0 of 21 ready
Start ticking. Most owners can produce about half of this list without help.
Corporate and capitalisation
The gap we find most often: A cap table that does not match what people believe they own, usually because a promised percentage was never documented.
Sellers fix this in the middle of diligence, under time pressure, with the buyer watching. It is the fastest route to a holdback.
Customer and supplier contracts
The gap we find most often: Assignment clauses requiring the counterparty's written consent, in exactly the contracts the buyer is paying for.
Consents become closing conditions. Each one hands a customer leverage over your timetable and sometimes over your price.
Employment and benefits
The gap we find most often: Long-serving contractors who look like employees, and key staff with no enforceable non-solicit.
Classification exposure lands in the indemnity. Unprotected key staff reduce what the buyer is willing to pay for the team.
Intellectual property
The gap we find most often: Code, drawings or brand assets built by a contractor who never signed an assignment.
The buyer cannot confirm ownership of what it is buying. Expect a specific indemnity outside the general escrow.
Real estate and environmental
The gap we find most often: A lease that requires landlord consent on a change of control, discovered in the final fortnight.
Landlords negotiate when they know your closing date. Consent becomes a renegotiated rent.
Tax
The gap we find most often: Sales tax nexus created by remote staff or online sales, never registered anywhere.
Unquantified exposure. Buyers respond with a special escrow that survives longer than everything else.
Litigation and compliance
The gap we find most often: A demand letter that was answered informally and never closed out in writing.
Anything unresolved is treated as a live liability and priced as one.
A readiness score is a prompt for a conversation, not a valuation, a prediction or legal advice. Every transaction turns on its own facts, and nothing here creates an attorney-client relationship.
When the work is cheapest
Every item on the readiness list is easier and cheaper to fix the further you are from a signed letter of intent. This is the sequence we run with sellers.
Three years out
Clean up the corporate record, sign the IP assignments that were never signed, and fix contracts that cannot be assigned without consent.
Eighteen months out
Run a readiness review the way a buyer's counsel would, then work the fix list while there is still time to negotiate rather than concede.
Before the letter of intent
Settle structure, escrow, earn-out and exclusivity while other buyers are still in the picture. Once exclusivity is signed, the timetable is theirs.
After closing
Track escrow release, earn-out measurement periods and restrictive covenant expiry. These dates outlive the excitement of the closing dinner.
Succession tool
The six Ds every buy-sell agreement has to answer
Most ownership litigation we see began with an operating agreement that was silent on one of these six events. Each tab is a drafting checklist: the mechanism, how the purchase is funded, how the price is set, and the clause that usually fails.
Does the surviving owner buy the estate out, or does the family become a partner?
- Mechanism
- Mandatory purchase. The estate must sell and the company or surviving owners must buy, so neither side can hold out.
- Funding
- Life insurance owned to match the structure: the entity owns the policies in a redemption, each owner insures the others in a cross-purchase.
- Valuation
- Agreed value certified annually, with an independent appraisal if the certificate is stale.
- What usually fails
- Policies bought once and never revisited, so the cover no longer matches what the interest is worth.
How long does an absent owner keep drawing before the buyout starts?
- Mechanism
- Optional purchase after a defined elimination period, with a written definition of disability that does not rely on a doctor's opinion alone.
- Funding
- Disability buyout insurance, or an installment note with a defined term and interest rate.
- Valuation
- Same formula as death, often at a small discount to reflect the instalment terms.
- What usually fails
- No definition of disability at all, which turns a health crisis into a dispute about whether the trigger has occurred.
Can a former spouse end up holding voting units in your company?
- Mechanism
- The company or the other owners get a right of first refusal over any interest awarded in a dissolution.
- Funding
- Installment note, usually over several years, because divorce rarely arrives with cash on hand.
- Valuation
- The agreement's own formula, so the family court has a number to work from rather than a contested appraisal.
- What usually fails
- Spousal consent never obtained at signing, so the restriction is argued over at the worst possible moment.
What does a voluntary leaver get, and when do they get it?
- Mechanism
- Put and call rights with notice periods, plus a distinction between leaving for good reason and simply walking out.
- Funding
- Sinking fund or installment note, with a cap on the annual payment so the company survives the buyout.
- Valuation
- Formula value, often with a discount for a departure inside an agreed minimum service period.
- What usually fails
- No cap on payments, so the buyout drains the working capital the remaining owners need to keep trading.
Two equal owners, one decision, no agreement. What breaks the tie?
- Mechanism
- A named tiebreaker, then escalating options: mediation, a shotgun or Texas shoot-out clause, or an agreed sale process.
- Funding
- Whatever the winning side can raise, which is exactly why a shotgun clause favours the better-funded owner.
- Valuation
- Set by the offering owner in a shotgun, or by an independent appraiser in a gentler mechanism.
- What usually fails
- A shotgun clause dropped into a fifty-fifty company where one owner could never fund the purchase.
What happens when an owner breaches, competes, or loses the licence the business needs?
- Mechanism
- Compulsory transfer at a reduced value, defined narrowly so it cannot be used to squeeze out a difficult but compliant owner.
- Funding
- Installment note, with the right to set off provable damages against the payments.
- Valuation
- Formula value less an agreed adjustment, stated as a number rather than left to argument.
- What usually fails
- A default definition so broad that it invites litigation over whether the trigger fired at all.
Three ways to set the price, and what each one costs you
Agreed value certificate
Owners sign a value each year and the most recent certificate governs.
Cheap, fast and predictable while it is kept current.
Goes stale within a year or two of being signed, which is when it is usually needed.
Formula
A multiple of a defined earnings measure, with the adjustments written out.
Self-updating and hard to argue with if the definitions are tight.
A multiple set in a good year can look absurd in a bad one.
Independent appraisal
A named appraiser, or one appraiser per side plus a third to break a tie.
Defensible, and the right answer for large or contested interests.
Slow and costly, and the appraisal itself becomes a negotiation.
Drafting guidance for a demo website, written generally. Whether any mechanism suits your company depends on its entity type, tax position, insurance and the people in it. Nothing here is legal advice.
Tax and insurance treatment changes. How a redemption, a cross-purchase and a hybrid are taxed, how insurance proceeds are treated inside an entity, and how a buy-sell price is respected for transfer tax purposes all depend on current federal and Connecticut rules. Confirm the treatment with us and your accountant before you sign anything.
Where to go next
- Mergers & acquisitionsSell-side and buy-side counsel, letter of intent through earn-out
- Business formationWhere the buy-sell terms are written in the first place
- Estate planningMaking the owner's plan agree with the company's agreement
- Case resultsRepresentative matters, described without dollar figures
Start with a readiness review
A fixed-fee review of the corporate record, contracts, employment file and title, with a ranked fix list. Credited toward deal fees if we run the sale.