Perspectives & Insights Article

David Douglas, Managing Director, Technology Investment Banking

The decision to sell a business or raise capital is one of the most significant events in a founder’s journey. Most founders have never been through this process, but the ones who navigate it the best are the ones who come to the table prepared. In this article, we’ll walk through key questions and considerations, and how an investment banker can advise and guide you through the process.

Know What You Want (Before Anyone Else Does)

Ultimately, you and your team know what you’re looking to get out of the deal. It is important to understand your spectrum of options before you come to the table. You can ask yourself:

• What does your life look like post-close? Transitioning out of the business looks very different compared to continuing a leadership role and will play a major role as you negotiate.
• Are you considering a full sale, a partial/minority recap, or growth equity? Each option offers different benefits and drawbacks, which your banker can discuss with you.
• Are you looking to cash out or roll equity? In other words, is your goal to de-risk today or bet on a second bite of the apple?
• Are you willing to sell to a financial buyer? Private equity buyers can often outbid strategic acquirers—and most founders don’t know this.
• Have you considered your co-founders and key stakeholders? It’s critical to get aligned with them earlier in the process rather than later.

Get Your Business Ready

Once you’ve identified your goal, it’s time to ensure your business is in order, financially and legally.

Financials

• Assemble clean, audited (or reviewed) financials for the trailing three years, as buyers and investors will scrutinize this carefully.
• Identify key performance indicators for your business like ARR (Annual Recurring Revenue), EBITDA (Earnings Before Interest, Taxation, Depreciation, and Amortization), revenue growth, gross margin, customer retention, and any metrics specific to your business model.

Legal & Compliance

• Ensure the intellectual property ownership, customer contracts, and employee agreements are in order.
• Cap table clean-up: options, warrants, and convertible notes should be resolved or accounted for before going to market.

Beyond the paperwork, your numbers need to tell a compelling story. Can you clearly articulate your market position, competitive moat, and growth thesis? Who is the right spokesperson—the founder, CFO, or a combination? And critically, do your metrics and story align, or is there a gap to close before going to market?

Get Yourself Ready

The emotional reality is that this process is likely going to be four to six months of intense distraction. Before you begin, ask yourself:

• Can the business continue to operate and grow while you’re in deal mode?
• Do you have realistic valuation expectations?
• What are your personal financial and lifestyle goals from this transaction?
• How will you handle confidentiality—who knows what, and when?

Understanding the Process

A properly run M&A or capital raise process typically unfolds in several phases: preparation and positioning, go-to-market and buyer outreach, management presentations, letter of intent negotiation, due diligence, and closing. From kickoff to close, most transactions take four to six months, though timelines vary based on deal complexity, buyer responsiveness, and how prepared the seller is coming in. Your investment banker can help manage this process end-to-end, keeping you informed and in control while protecting your ability to run the business day-to-day.

Competitive Tension Is Everything

If possible, you will want to run a competitive capital process. A single-buyer process almost always results in a worse outcome for sellers than one with competition. A well-run process creates leverage even if you have a preferred buyer, because there is always a risk of being re-traded—or having the buyer attempt to renegotiate the terms or price of a deal—at the finish line. You can protect against this by making sure you are providing clean data, presenting the right analyses, and limiting exclusivity through a process.

Of course, confidentiality and controlled information flow matter throughout the whole process, to keep any offers competitive.

The Economics That Really Matter

Purchase price is not everything, and there are other variables that should be taken into account before closing the deal:

• Working capital targets and adjustments
• Debt-like items that reduce your proceeds, like deferred revenue or accrued liabilities
• Indemnification, escrows, and holdbacks—portions of your proceeds held post-close to cover potential claims
• Earnouts
• Representations and warranties insurance—ask your banker whether this is applicable to your transaction

Working with an Advisor

Even if you have a letter of intent in hand, you should consider hiring an investment banking advisor to help handle the sale of your business. Here are a few reasons why:

• An advisor has the specific industry-related experience needed to handle both straightforward and more complex transactions in your market. They can also advise you, advocate for, and protect you during negotiations.
• An investment banker can take a lot of work off your plate, enabling you to keep running the business during the transition. Items like data analysis and material creation for the deal can be time-consuming, and having a team on your side can ease the burden.
• Execution depends on the team behind it. Get to know the team that will actually work your deal—not just the pitch team. Who will you be working with during this lengthy process? Chemistry matters.

With your investment banker’s advisory expertise and industry knowledge, you can rest assured that you will get the best possible outcome from your sale.

This material is being provided for educational and informational purposes only. D.A. Davidson & Co. is a registered broker-dealer and registered investment adviser that does not provide tax or legal advice. Information contained herein has been obtained by sources we consider reliable but is not guaranteed and we are not soliciting any action based upon it. Any opinions expressed are based on our interpretation of the data available to us at the time of the original article. These opinions are subject to change at any time without notice. Copyright D.A. Davidson & Co., 2026. All rights reserved. Member FINRA and SIPC.