Prep Phase: Turning Preparation into a Market-Ready Opportunity

When business owners think about selling their company, they often imagine the moment when buyers are approached, and negotiations begin. In reality, a great deal of work takes place long before that moment arrives. One of the most critical stages in that process is what we call the Prep Phase, which sits immediately before a business is taken to market.  

This stage lays the groundwork to ensure the business is presented to the market in a clear, compelling, and credible way. It involves careful analysis, preparation and positioning so that potential acquirers can quickly understand the opportunity and recognise the strategic value the business may offer. 

The Prep Phase begins once there is alignment between the shareholders and our team that the business is ready to proceed towards a sale process. In many cases, this follows the Foundation Phase, in which we analyse the drivers of value in the business and identify any gaps affecting saleability. However, it is important to recognise that the Foundation Phase is not always necessary. Some businesses are already well prepared, with clear financial information and aligned shareholders, and can move directly into the Prep Phase. 

Regardless of how the process begins, the objective of the Prep Phase is always the same. It is to transform the information we have about the business into materials that enable potential acquirers to quickly understand the opportunity, value drivers and strategic fit the business could offer them. 

At the centre of this work is the preparation of the Information Memorandum (IM), together with a short teaser document. These are the primary marketing materials that are shared with potential acquirers once the process begins. While this may sound straightforward, creating a high-quality IM is one of the most important and demanding parts of the Prep Phase. 

As DLI Deal Executive Nitish Mudgal explains: “Buyers who actively acquire companies constantly review opportunities. They have limited time and must quickly determine whether a potential acquisition deserves their attention. The IM therefore must do much more than describe the business. It needs to present the opportunity clearly and concisely while highlighting the elements that make the business strategically attractive.” 

A common mistake in many sale processes is treating this document primarily as a financial report. While the financial performance of the business is clearly important, focusing too heavily on numbers alone often fails to explain why the business matters to a particular acquirer. In our approach, the IM is designed to communicate the features and benefits of owning the business, much like a company would describe its products to customers. 

This means explaining not only what the business does, but also why its position in the market matters. The narrative includes the history of the company, the drivers of its growth, the structure of its operations and the opportunities for future expansion. It also examines how the business sits within its competitive landscape and how it compares with other companies operating in the same sector. 

Financial information is certainly included, but it is presented in a way that supports the broader story rather than overwhelming it. Historical performance, key financial metrics and forecasts are summarised clearly so that potential buyers can quickly understand the financial profile of the business while keeping the focus on the strategic opportunity. 

Another important aspect of the Prep Phase is ensuring that risks are addressed transparently. Every business has imperfections, and attempting to present a flawless picture rarely helps a sale process. Instead, the goal is to provide a balanced, credible view that helps potential acquirers understand both the strengths of the business and the areas that may require further development. Often, those areas represent opportunities for a buyer who has the resources or capabilities to unlock additional value. 

Nitish also notes that positioning a business for market is rarely a templated exercise. Every company is different, and each opportunity requires a unique narrative that reflects the business's specific characteristics and the strategic value it may hold for potential acquirers. As a result, IMs are carefully tailored to each situation rather than built from a standard template. 

Alongside the preparation of marketing materials, the Prep Phase also involves constructing one of the most important components of any sale process: the list of potential acquirers. This is not simply a list of companies operating in the same industry. It is a carefully researched group of organisations that may have strategic reasons to acquire the business. 

Developing this list involves analysing where the business sits in the value chain and identifying buyers that could benefit from owning it. Some acquirers may be competitors seeking to strengthen their market position. Others may be companies operating in adjacent markets that could use the acquisition to expand their capabilities or enter new geographic regions. 

According to Rick Grantham, Chief Executive of DLI Mid-Market, this research draws on multiple sources: “DLI’s internal databases capture years of interaction with investors and strategic acquirers, including their sector interests and investment mandates. Our international reach through the Pandea network enables us to identify potential buyers beyond South Africa, opening the door to global acquirers who may see strategic value in local businesses. Additional research tools and databases help expand the universe, ensuring the process is not limited to organisations already known.” 

This process is deliberately thorough because creating competitive tension between credible buyers is one of the most effective ways to achieve strong outcomes for sellers. The broader and more carefully constructed the buyer universe is, the greater the likelihood that the right strategic fit will emerge. 

One point that often surprises business owners is the amount of research that underpins the preparation of these materials. For example, when presenting a company operating in a particular industry, DLI frequently conducts detailed analysis of market trends, sector growth drivers and structural changes that could influence the company’s prospects. These insights help frame the opportunity from a buyer's perspective and demonstrate why the business may be well-positioned for growth. 

The result of all this work is a business ready to be introduced to the market in a controlled, compelling way. By the time the Prep Phase is complete, the narrative has been shaped, the financial story has been clarified, and the universe of potential acquirers have been carefully mapped. 

Only then does the process move into the market phase, where those potential buyers are approached and invited to evaluate the opportunity. 

For many business owners, this preparation stage remains largely invisible because it takes place before the market becomes aware that a sale process is underway. Yet in many respects, it is one of the most important stages of the entire transaction. The quality of the preparation directly influences how buyers perceive the business and how effectively the opportunity is communicated.