Your Business. Your Next Chapter.
A guide to the sell-side M&A process for government contractors.
Stages overlap, and timing varies with the company’s readiness, buyer financing, the scope of diligence, and any required reviews or approvals. Every transaction follows its own schedule.
20-second overview of the sell-side process
Overview
Six stages, from preparation to closing
Illustrative timeline: 6–12+ months
See how a sale typically unfolds, then explore each stage in detail below. Press Play for the 20-second overview, or select a stage.
Windows are illustrative and overlap. Faded bar ends indicate stages that can run longer.
Read the overview
Selling your government contracting business typically takes six to twelve months. We prepare your financials and story, confidentially approach buyers, evaluate offers, and lead management presentations. Then, we negotiate a letter of intent, navigate financial and government contracting diligence, finalize agreements, address required approvals, and close.
Timing is illustrative. Some transactions take longer, and stages often overlap.
What happens at each stage?
Each stage builds on the one before it, and several run in parallel. Select a stage to see what happens, what is expected of you as the owner, and how The McLean Group helps.
01PrepareMonths 1–2 · Define your goals. Prepare your business.
What happens
The process begins with your objectives: why you are considering a sale, when, and what you want from it. That includes valuation expectations, liquidity needs, and how involved you want to be after closing, whether that means staying on, transitioning over a defined period, or stepping away.
With an advisor selected, you receive a preliminary valuation perspective and consider transaction structure, such as a full or partial sale, retained (rollover) equity, and stock versus asset purchase. A readiness assessment identifies issues buyers are likely to raise so they can be addressed early.
Getting the business ready
- Historical financial statements, organized and reconciled
- Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), normalized for one-time and owner-related items
- Forecasts supported by backlog and pipeline
- Net working capital history
- A virtual data room (VDR): a secure online repository for diligence documents
- Where appropriate, a sell-side quality of earnings (QoE) review by an independent accounting firm to test earnings before buyers do
Marketing materials
- Anonymous teaser: a short profile that describes the business without naming it
- Confidential information memorandum (CIM): a detailed document covering operations, customers, contracts, financials, and growth opportunities
- Management presentation: the story your leadership team presents to serious buyers
- Buyer list: strategic acquirers and financial sponsors, with any parties you want excluded
Your role
Share your goals candidly, provide financial, contract, and personnel information, review materials for accuracy, and help shape how the company’s story is told. Just as important: keep running the business. Performance during the process matters to buyers.
How The McLean Group helps
We help clarify objectives and alternatives, provide a preliminary valuation perspective, assess readiness, coordinate with your accountants and legal counsel, prepare the teaser, CIM, and management presentation, build the buyer list, and organize the data room.
Key deliverables and decisions
Decision to proceed and target timing; valuation expectations and preferred structure; approved buyer list and exclusions; completed teaser, CIM, and data room.
Government contracting considerations
Buyers of government contractors look closely at the quality and durability of revenue. Preparation typically documents:
- The contract portfolio, including prime and subcontract roles, contract types, and periods of performance
- Funded and unfunded backlog, explained clearly and reconciled to financials
- Upcoming recompetes and the strategy for each
- Customer concentration by agency, program, and contract
- Contract vehicles, such as indefinite delivery/indefinite quantity (IDIQ) contracts, governmentwide acquisition contracts (GWACs), and General Services Administration (GSA) schedules
- Prime and subcontractor relationships and teaming agreements
- Pipeline quality, distinguishing qualified opportunities from early-stage prospects
- Key personnel, including program leadership and, where relevant, cleared staff
- Small business size status and the share of revenue tied to set-aside awards, where applicable
02Go to MarketMonths 2–4 · Confidentially engage qualified buyers.
What happens
Potential buyers are targeted and screened for strategic fit, financial capacity, and acquisition experience. Outreach begins anonymously with the teaser. Interested parties sign nondisclosure agreements (NDAs) before receiving the CIM, and their initial questions are answered alongside preliminary diligence.
Protecting confidentiality
Information is released in stages. Buyers receive more detail as they demonstrate serious interest, and the most sensitive items, such as customer-specific pricing or employee details, are typically held until later in the process or shared under additional protections.
An NDA is a contractual commitment, not a security authorization. It does not permit sharing classified, controlled unclassified, export-controlled, or otherwise restricted information, which remains subject to its own rules and is generally not part of marketing materials.
Your role
Maintain confidentiality inside the company, continue running the business, route buyer questions through your advisor, and weigh in on which parties should be approached.
How The McLean Group helps
We manage outreach and all buyer communications, coordinate NDA review with counsel, track buyer engagement, field questions, control data room access, and set the process timeline and deadlines for initial proposals.
Key deliverables and decisions
Executed NDAs; CIM distribution to qualified parties; responses to initial questions; a process letter setting the deadline and format for indications of interest.
Government contracting considerations
- Some interested buyers may compete with you for the same contracts. Competitively sensitive information is limited accordingly.
- Buyer characteristics, such as size, ownership, or foreign ownership, can affect small business status, eligibility for certain work, or clearance matters. These are flagged early so they can be evaluated with counsel.
- Potential organizational conflicts of interest (OCI) between a buyer’s existing work and your contracts may be relevant to buyer fit.
03Evaluate BuyersMonths 3–5 · Compare offers and meet potential partners.
What happens
Buyers submit initial indications of interest (IOIs): preliminary, nonbinding proposals outlining valuation and structure. These are compared, and a shortlist is invited to management presentations, buyer meetings, and additional diligence. This diligence goes deeper than the initial review but remains narrower than the confirmatory diligence that follows a letter of intent. Shortlisted buyers then submit refined proposals.
Offers differ beyond headline price
- Cash at closing versus deferred or contingent payments
- Rollover equity you retain in the combined business
- Earnouts tied to future performance
- Financing sources and how firmly they are committed
- Execution certainty, including diligence scope and required approvals
- Plans for employees, culture, and location
- Your future role, if any
Your role
Present the business alongside your leadership team, meet prospective partners, assess cultural and strategic fit, and decide which buyers advance.
How The McLean Group helps
We compare proposals side by side on value and terms, prepare your team for management presentations, coordinate meetings, test buyer assumptions and financing, and maintain a competitive process.
Key deliverables and decisions
Comparison of indications of interest; shortlist of buyers; management presentations; refined proposals.
Government contracting considerations
Buyers will form views on recompete risk, backlog quality, and how your contract vehicles fit with theirs. Useful questions include how a buyer’s size or ownership may affect future set-aside eligibility, how the buyer approaches clearance-related continuity where relevant, and its experience acquiring and integrating government contractors.
04Select a PartnerMonths 4–6 · Negotiate key terms and a letter of intent.
What happens
Final negotiations lead to a preferred buyer and a letter of intent (LOI). Once signed, the buyer typically receives exclusivity for a defined period, during which you agree not to negotiate with other parties while the buyer completes diligence.
An LOI sets out the proposed terms of the transaction. It is generally nonbinding with respect to the acquisition itself, while certain provisions, such as exclusivity, confidentiality, and expenses, may be binding.
What an LOI typically addresses
- Purchase price
- Structure, including any rollover equity or earnout
- Financing expectations
- Scope of confirmatory diligence
- Working capital approach, usually a target level of net working capital
- Target closing schedule
- Your post-closing role and key employee arrangements
Your role
Weigh final proposals on value, terms, and certainty of closing; approve LOI terms; and agree to exclusivity with the selected buyer.
How The McLean Group helps
We negotiate terms on your behalf, work to resolve ambiguities that could lead to renegotiation later, and coordinate with your legal and tax advisors before you sign.
Key deliverables and decisions
Selection of a preferred buyer; signed LOI; exclusivity period; confirmatory diligence plan and timeline.
Government contracting considerations
Where relevant, it helps to address early how the parties expect to handle contract consents or novation, effects on small business status, recompetes that may be decided during the process, and any clearance or ownership-related reviews. Settling expectations at the LOI stage reduces surprises later.
05Complete DiligenceMonths 5–9+ · Validate financials, contracts, and operations.
What happens
After the LOI, the buyer and its advisors conduct confirmatory diligence, which is broader and deeper than earlier reviews. They validate earnings, backlog, pipeline, customer relationships, contracts, and the assumptions behind management’s forecasts.
This work proceeds in parallel with negotiation of the definitive purchase agreement, preparation of disclosure schedules, the buyer’s financing, and any applicable reviews.
Typical diligence areas
- Financial, often including the buyer’s own quality of earnings review
- Tax
- Legal and contracts
- Commercial and customer
- Operational
- Human resources and benefits
- Technology and cybersecurity
- Insurance
Your role
Respond to requests promptly and accurately, make key people available as appropriate, review disclosure schedules with counsel, and keep the business performing. Results during diligence directly affect buyer confidence.
How The McLean Group helps
We manage request lists and the data room, coordinate responses, anticipate issues before they affect value or timing, support your counsel on agreement negotiations, and keep all parties on schedule.
Key deliverables and decisions
Diligence responses; buyer financial diligence findings; negotiated purchase agreement and disclosure schedules; financing commitments; resolution of issues identified in diligence.
Government contracting considerations
Requirements depend on transaction structure, ownership, contracts, and the circumstances of the business, and they are evaluated with legal counsel and relevant specialists. Some actions occur after closing. Areas commonly reviewed include:
- Contract terms: assignment restrictions, change-of-control provisions, and required notifications
- Novation: generally relevant when government contracts are transferred to a new legal entity, as in many asset purchases. A stock purchase that leaves the contracting entity unchanged generally does not require novation, though other notifications may apply.
- Size status and set-asides: an acquisition can affect small business size or socioeconomic status, including recertification obligations and eligibility for future set-aside awards
- Security clearances: where the company holds a facility clearance, ownership changes generally require reporting to the cognizant security agency, and personnel clearance continuity is reviewed
- Foreign ownership: foreign investment can raise foreign ownership, control, or influence (FOCI) matters and, in some cases, review by the Committee on Foreign Investment in the United States (CFIUS)
- Compliance: applicable requirements may include cybersecurity obligations such as the Cybersecurity Maturity Model Certification (CMMC) program, cost accounting and timekeeping practices, export controls, and entity registrations
06CloseMonths 6–12+ · Finalize agreements and transfer ownership.
What happens
The parties finalize the purchase agreement and related documents, such as employment or consulting agreements, escrow arrangements, and any rollover equity documents. Applicable approvals and third-party consents are obtained, financing is funded, and closing conditions are satisfied.
A funds flow memorandum sets out exactly where money goes at closing, including debt repayment and transaction expenses. Ownership then transfers to the buyer.
Your role
Review final documents and the funds flow with your advisors, coordinate personal tax and wealth planning, and prepare to communicate the transaction to employees, customers, and partners.
How The McLean Group helps
We manage the closing checklist, coordinate the parties, review the funds flow, and help resolve final issues so the transaction closes on schedule.
Key economic protections, in plain language
Government contracting considerations
Some government-related steps, such as submitting novation requests or updating registrations, may occur after closing rather than before it. The timing depends on the transaction and is planned with counsel.
After closing
- Transition support: the agreed role you play in handing over relationships and knowledge
- Required notifications: to employees, customers, contracting officers, and other parties, as applicable
- Purchase price adjustments: final working capital and other post-closing true-ups
- Ongoing obligations: any agreed earnout measurement or rollover equity arrangements
This overview is for general informational purposes only and does not constitute legal, tax, accounting, or investment advice. Every transaction is different. Timing, structure, and requirements depend on the specific circumstances and should be evaluated with qualified advisors.
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