Before a sale process launches, the attorney should sort every readiness gap into one of three bins: fix it now, disclose it in the CIM, or hold it for diligence with a prepared answer. The gaps that cost sellers the most are the ones a buyer discovers rather than hears about, because discovery in diligence can be read as concealment and can give the buyer a reason to re-trade. The readiness review is the last step of the discovery phase, and it is the step an attorney is better placed to run than anyone else on the client's team.
The gaps that are cheap to fix and expensive to leave
Some readiness gaps take a few weeks and a few thousand dollars to close, and leaving them open can cost a multiple point or an entire buyer. The attorney should start with these.
Corporate housekeeping is the first category. Missing minutes, an unsigned operating agreement, a stock ledger that does not match the cap table the owner described, or a prior transfer of shares that was never papered. A buyer's counsel will find each of these and ask for a representation the seller cannot cleanly give. Fixing them now is ordinary corporate work the firm already does.
Key employee agreements are the second. If the two people who run operations and sales have no written agreements, no confidentiality obligations, and no restrictive covenants, a buyer may price the risk that they leave at close. Putting agreements in place before launch, with retention terms tied to a transaction if the client agrees, can convert a buyer's concern into a clearer risk discussion.
Assignability is the third. The attorney should read every material contract and lease for change-of-control and anti-assignment provisions and build a list of consents that will be needed. Some can be obtained quietly before launch. Others cannot, but knowing the list lets the attorney tell buyers what the consent path looks like rather than having a buyer discover it in week six of diligence. Material contracts and their disclosure treatment are recognized as a distinct disclosure issue in public-company reporting guidance, although the firm's private-sale analysis remains fact-specific. [1]
Intellectual property ownership rounds out the list. Software written by a contractor without an assignment, a trademark registered in the owner's personal name, or a domain held by a former employee can create diligence issues. The USPTO's trademark materials direct owners to understand the registration process and ownership records, which is a useful prompt to verify who owns and controls the relevant rights before launch. [2]
The gaps that belong in the CIM
Some gaps cannot be fixed before launch, and the choice is whether to disclose them in the marketing materials or wait. The rule is that anything a buyer is likely to find in the first week of diligence should be considered for disclosure in the CIM, framed with the seller's explanation.
Customer concentration is the classic example. If one customer is 35 percent of revenue, every buyer will see it in the first data cut. The CIM should state it, describe the relationship's length and contract terms, and explain the plan to diversify. The buyer still discounts the concentration, but the buyer does not have to discount the seller's credibility because the fact was withheld.
Financial statement quality is another. If the statements are compiled rather than reviewed, say so, and consider whether a sell-side quality of earnings report is worth commissioning before launch. For a business above a few million of EBITDA, it may be worth considering, depending on the records, buyer expectations, and cost. AICPA and CIMA materials describe diligence techniques for scrutinizing prospective financial information and pairing that work with valuation analysis, supporting a review based on the facts rather than a categorical rule. [3]
A pending claim, a regulatory inquiry, or a lease that expires within a year all belong in the same category when material to the buyer's assessment. Disclosed with context, each is a fact the buyer can price. Discovered, each can become a reason for the buyer to renegotiate.
The gaps that wait for diligence, with an answer ready
A third set of gaps is real but not material enough for the CIM, or sensitive enough that disclosure should wait for a signed NDA and a demonstrated level of buyer interest. Minor litigation that is fully insured, a vendor dispute that is likely to settle, an environmental report that is clean but old, or a sales tax exposure the CPA is quantifying. For each, the attorney should prepare the document and the explanation now and stage them in the data room for release in the offers phase.
The test is whether the attorney would be comfortable if the buyer found the item without warning. If the answer is no, it moves up to the CIM. If the answer is yes, because the item is small and the explanation is complete, it waits. The attorney should still confirm the disclosure decision against the engagement scope, applicable law, and the client's facts.
Running the review as a working session with the client
The readiness review works best as a single working session, with the attorney, the associate who ran the request list, the client, and the client's CPA. The attorney brings the list of gaps found during intake and the proposed bin for each. The client confirms the facts, adds what the attorney missed, and decides on the items where the choice is the client's, such as whether to approach a landlord for an early renewal or whether to disclose a planned price increase.
The output is a readiness memo with three sections matching the three bins, an owner for each item, and a date. The fix-now items become a short project plan that can run in parallel with the marketing materials phase. The disclose items go to the person drafting the CIM. The diligence items go into a staged folder with the explanation attached.
Set a launch condition. The attorney and the client should agree which fix-now items must be complete before the teaser goes out. Some, like key employee agreements, may be conditions. Others, like a trademark assignment, can close during marketing if the client and attorney judge that timing acceptable.
When the review says do not launch yet
Occasionally the readiness review finds something that should delay the process by months rather than weeks. A revenue decline that is still running, a lawsuit that will resolve in a quarter, a key customer renewal that is three months away, or an owner who has not yet replaced himself in the role a buyer will care most about. The attorney should say so plainly. A process launched into a known problem can produce lower offers and a weaker negotiating position, and a client who waits six months with a plan may do better than one who launches now and re-trades later.
One thing to do this week: for an owner client with a business you know well, write down the three facts a buyer's counsel would likely find in the first week of diligence that the owner has never papered or disclosed. That list is the beginning of a readiness review, and it is a conversation the client will value whether the sale happens next year or in five.
How Acquivo Pro fits
Acquivo Pro treats discovery and readiness as the first phase of the sell-side process, with the questionnaire and the document request list feeding one data room. The firm's team can see what has arrived and what is missing, which is the raw material for the three-bin readiness sort. Disclosures the client approves in the branded portal flow into the CIM the platform generates, and documents held for diligence can be staged for release when the attorney decides. The attorney and the client decide what to fix, what to disclose, and when to launch. To walk through a process on a client you have in mind, request a demo through the Contact page.
Key Points
- An attorney preparing a client for sale should sort each readiness gap into fix now, disclose in the CIM, or hold for diligence with a prepared answer.
- Corporate housekeeping, key employee agreements, contract assignability, and IP ownership are readiness gaps that can be less costly to address before launch than during diligence.
- A buyer is likely to find customer concentration or compiled financial statements early, so the attorney should assess whether the CIM needs disclosure with the seller's explanation.
- A readiness memo with an owner and a date for each item lets fix-now work run in parallel with the marketing materials phase.
- An attorney who tells a client not to launch yet, when the review shows a problem that may resolve in a quarter, can preserve more negotiating room than one who launches into it and re-trades later.
Sources and references
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