From First Conversation to Signed Agreement.

1. Preliminary Conversation — No Documents, No Commitment

The first step is a phone call with no documents and no commitment. No financial information changes hands at this stage. We describe what we do, we ask about your business, and we both decide whether a further conversation is worth having. This call exists to determine whether there is a basis for a real discussion.

Nothing said in this call is binding or confidential without a signed agreement in place. Do not share specific financial details until the NDA is signed.

2. Mutual NDA — Protecting Both Sides Before Anything Else

Before any financial information changes hands, both parties sign a mutual NDA. Mutual means it protects you as well as us. We provide it. You should have your attorney review it before signing. It covers what counts as confidential information, how long the obligation lasts, what happens if either party breaches it, and what is excluded.

We do not ask you to sign a non-compete or a no-shop agreement at this stage. You are not agreeing to sell. You are agreeing to have a protected conversation.

3. Financial Review — We Do the Work, You Provide the Documents

Once the NDA is signed, we ask for financial records. The standard package is three years of tax returns, three years of profit and loss statements, the most recent balance sheet, and a brief description of customer concentration, employee count, and any major contracts.

We do this review internally and will not use it to build leverage. We are looking to understand what the business actually earns, what the owner's compensation and discretionary expenses look like, and whether the numbers are consistent year over year. This review typically takes one to three weeks depending on the completeness of the records.

4. Indication of Interest — Our First Number, in Writing

If the financial review supports a deal, we send a written indication of interest. This is not a binding offer. It is a statement of our preliminary valuation range and the general deal structure we are considering — the approximate price range, the proposed structure, general note terms, and the key conditions to be satisfied before a formal offer.

You are not bound by receiving this document. You can walk away, take it to your accountant, or come back with a different number and explain why. This is the beginning of negotiation, not the end of it.

5. Valuation Discussion — Where Both Numbers Live

Most sellers have a number in mind; we have a number based on the financial review. These are rarely the same at the start. That is normal. Our number is based on the business's free cash flow — what the business generates after operating costs and a realistic owner's salary. We apply a multiple based on size, stability, customer concentration, and sector. We explain every component.

The valuation discussion should end with a number both sides can defend. If we cannot get there, there is no deal — and that is a legitimate outcome. A deal built on a number neither party believes in will not survive due diligence.

6. Letter of Intent — The First Binding Commitments

Once aligned on value and general structure, we sign a letter of intent. The LOI sets out the agreed terms at a level of specificity sufficient to guide the drafting of final documents. It typically covers the purchase price and its allocation, the key note terms, the transaction structure, the conditions to closing, the exclusivity period, and the timeline.

Most of the LOI is not binding — price and structure can still change if due diligence reveals something material. What is binding: the exclusivity clause, the confidentiality provisions, and certain expense terms.

A note on exclusivity: it is a reasonable request from a buyer about to spend significant time and money on diligence. It is equally reasonable for you to ask for a shorter exclusivity period or for protection if we walk away for reasons other than a material finding. Have your attorney negotiate this carefully.

7. Due Diligence — The Full Review, Done Honestly

Due diligence is our thorough review of everything the business is and owns before we commit to a final price and close. It covers four areas.

Financial due diligence verifies that the numbers you provided are accurate. We reconcile tax returns to financial statements, review accounts receivable aging, examine inventory where relevant, and identify any significant one-time items that were not disclosed in the preliminary review. We also review working capital.

Legal due diligence reviews contracts, leases, permits, licenses, intellectual property, litigation history, and corporate formation documents. We are looking for anything that creates an undisclosed liability, restricts the transfer of the business, or requires third-party consent to the sale.

Operational due diligence is our attempt to understand how the business actually works — its customers, suppliers, key employees, production processes, and physical assets. This is where technical background matters: we are evaluating the operation, not just reading a description of it.

Environmental and regulatory due diligence applies where the business operates in a regulated sector or has environmental exposure. This is more involved in some of our sectors than in others.

Due diligence takes four to twelve weeks depending on complexity. We will not use minor findings to renegotiate the price. We will use material findings to have an honest conversation about whether and how they affect the deal.

8. Representations and Warranties — What You Are Certifying Is True

In the final purchase agreement, both parties make formal representations about what is true at closing. As the seller, you will represent that the financial statements are accurate, all material contracts are disclosed, there is no pending undisclosed litigation, the business owns or has rights to its intellectual property, and there are no undisclosed liabilities.

The negotiation around representations involves wording, qualifiers, and survival periods. Standard seller-friendly positions include shorter survival periods, knowledge qualifiers, caps on indemnification liability, and minimum thresholds before a claim can be made. We do not ask for representations broader than what we need to understand what we are buying.

9. The Seller Note — The Core of the Deal Structure

The seller note is a legally binding promissory note from Superposition to the seller. It contains the principal amount, the annual interest rate, the payment schedule, the maturity date, the security interest, the prepayment conditions, the events of default, and the remedies available to the seller if the buyer defaults.

The most important seller protections are the security interest and the default provisions. The note should be secured by the assets of the business — this gives the seller the right to take back the business or its assets if the buyer stops paying. The default provisions should be defined clearly: missed payments, insolvency, and sale of material assets without consent are standard triggers.

We negotiate note terms transparently. We will not propose terms we cannot explain or that we would not agree to if the positions were reversed.

10. Working Capital Adjustment — Getting the Baseline Right

At closing, most acquisitions include a working capital adjustment. Working capital is the cash, receivables, inventory, and other short-term assets of the business, minus its short-term liabilities. The purchase price is set assuming the business delivers a normal level of working capital at close.

If the business delivers more than the agreed baseline, the seller receives more; if less, the price adjusts downward. The negotiation involves how the baseline is defined, what items are included, how the final figure is measured, and how disputes are resolved. The methodology should be agreed and clearly written before close — disputes about working capital are among the most common post-close conflicts in lower middle market transactions.

11. Transition Agreement — What Happens After Close

If the seller stays on in any capacity after closing, those terms are documented in a separate agreement. This covers the seller's role, duration, compensation, what decisions require their involvement, and the conditions under which either party can end the arrangement. We do not leave this informal.

12. Closing — Documents, Signatures, and Transfer

Closing is the simultaneous exchange of documents and consideration. The buyer delivers whatever cash component was agreed; the seller delivers the business — its assets, contracts, records, and keys. Both parties sign the final documents: the purchase agreement, the seller note, the security agreement, the transition agreement, any required third-party consents, and any intellectual property assignments.

After closing, the business continues to operate. Employees show up to work. Customers continue to be served. The operational transition happens over the following weeks and months according to the plan both parties agreed to during due diligence.