The situation
Take a corrugated box maker in Nashik. The founder started it in the late nineties, built it to two plants and a steady list of FMCG and pharma customers, and is now in his early sixties. His children have careers elsewhere. A larger packaging group from Gujarat has asked, informally, whether he would consider selling. He has never sold a company. He does not know what the buyer will ask for, how long it will take, or what could make the price fall after the first conversation.
This is a common position for Indian promoters. The business is profitable, but it has been run for the owner. Preparing for sale means closing that gap before the buyer finds it.
Start twelve to eighteen months out
A buyer's first serious step is due diligence: a structured review of your finances, contracts, legal standing, tax position, people and operations. Anything they find that is unclear becomes either a price reduction, a holdback of part of the price, an indemnity you sign, or a reason to walk away. You cannot clean up three years of records in the three weeks before diligence starts. Twelve to eighteen months gives you at least one full financial year of clean, audited numbers to show.
Step one: get the numbers into a shape an outsider can read
Separate the owner from the business
Many family run companies carry personal costs through the business: vehicles, travel, relatives on the payroll. A buyer will want to see earnings without them. Start reducing these costs now, and keep a clear schedule of the ones that remain, with amounts by year. Your CA can help prepare a statement of adjusted earnings that shows what the business earns once these items are taken out.
Reconcile what the buyer will reconcile
Buyers compare your audited accounts with your GST returns, your TDS filings and your bank statements. Differences that you can explain in one sentence are fine. Differences you cannot explain look like risk. Ask your accountant to run the same reconciliation now, month by month, for the last three years, and to write down the reason for each gap.
Monthly management accounts
If you only see numbers at audit time, start producing monthly accounts: revenue by customer and product, gross margin, overheads and working capital. A buyer will ask for them.
Step two: put contracts and approvals on paper
Long relationships in India often run on trust and a purchase order. A buyer cannot buy trust. Make a list of your top twenty customers and top twenty suppliers and check what is actually signed. Look for:
- customer agreements that have expired or were never signed
- clauses that let a customer end the contract if your ownership changes
- leases for factory land or warehouses, and whether they can be transferred
- licences and registrations (factory licence, pollution control consents, fire safety, trade licences) and their renewal dates
- intellectual property, such as trademarks for your brand, registered in the company's own name
Where a key agreement is missing, try to put one in place now, while the relationship is calm and no sale is being discussed.
Step three: reduce the business's dependence on you
If every large customer calls the founder directly, and every price decision waits for him, the buyer is really buying one person. That person is about to leave. Buyers either lower the price, pay part of it later depending on performance, or ask the founder to stay for two or three years.
Pick two or three people who can own customer relationships, production and finance. Give them real authority over the next year and let customers get used to dealing with them. Write down the processes that live only in your head: how you price a new order, how you choose a paper supplier, how you handle a quality complaint.
Step four: clean up the corporate record
Check your statutory registers, board minutes and filings with the Registrar of Companies. Missing annual filings, share transfers that were never recorded properly, or loans from directors without the right approvals under the Companies Act are all things a buyer's lawyer will find. Most can be corrected, but corrections take time and sometimes carry fees or penalties. Ask your company secretary or lawyer to review the record now.
If family members hold shares, confirm who holds what, and whether everyone agrees in principle to sell. A minority shareholder who refuses late in the process can stop a deal.
Step five: understand what the sale means for you
Before you talk price, talk to your CA about tax. The tax on selling shares in a company is different from the tax on the company selling its assets or its business, and the buyer may prefer one structure while you prefer another. Stamp duty also differs by state and by structure. You should know the after tax amount you would actually receive under each option, so you can judge an offer properly.
Decide what you want beyond the price: whether you will stay on, for how long, what happens to long serving staff, and whether you want to keep any part of the business, such as the land.
Step six: prepare the room before anyone asks
Collect the documents a buyer will want into one organised place: three years of audited accounts, tax filings, contracts, licences, employee records and property papers, named consistently with a simple index. When diligence starts, you will answer requests within days.
Employee records and customer lists contain personal data. India's Digital Personal Data Protection Act, 2023 applies to how you share that data, so plan to share summaries first and full records only when needed and only with the people who need them.
What preparation cannot do
Preparation will not turn a declining business into a growing one, and it will not change what comparable companies sell for. If your largest customer is leaving, a buyer will find out, and hiding it creates a much bigger problem later. Some issues, such as an old tax dispute, cannot be resolved in a year. In that case the right step is to document the issue clearly, get an estimate of the possible outcome, and expect the buyer to price it or ask for an indemnity.
Preparation also does not replace advisers. You will need a CA for tax and accounts, a lawyer for the agreements, and possibly an investment banker or M&A adviser to run the process. Synerger gives your advisers and your team one place to work, with the diligence checklist, the data room and the record of every request, but the judgement about price and terms stays with you and the people you trust.
A short checklist
- At least one full year of audited accounts with owner costs reduced and the rest scheduled
- Accounts reconciled with GST, TDS and bank statements, gaps explained in writing
- Monthly management accounts running
- Top customer and supplier contracts signed and current, change of control clauses listed
- Licences, consents and leases checked for validity and transferability
- Two or three managers holding real customer and operational responsibility
- Company records and ROC filings reviewed by a company secretary or lawyer
- All shareholders aligned in principle
- After tax proceeds estimated with your CA for each likely structure
- Documents collected, indexed and ready for a data room
When you are ready to see how a sale is run from first call to closing, start with our guide for founders and owners.