What actually happens during an acquisition?

Buying a business is a major milestone. And for most SME owners, it’s not something they’ve done before.

While the commercial rationale may be clear, the acquisition process itself can feel unfamiliar, stressful, and confusing. Legal, financial, and operational work all happens at the same time, often under tight timelines.

This article explains what actually happens during an acquisition, stage by stage, and what buyers should expect along the way.

The acquisition process at a glance

Although every deal is different, most acquisitions follow the same broad stages:

1. Initial discussions and making an offer
2. Heads of Terms / Letter of Intent
3. Due diligence
4. Negotiation of legal documents
5. Exchange and completion
6. Post-completion matters

These stages often overlap, and timelines vary, but the pressure points are predictable.

Stage 1: Initial discussions and making an offer

Early discussions are about more than price.

Buyers and sellers begin aligning expectations around value, deal structure, timing, and conditions. Decisions made at this stage — often informally — can shape risk and leverage later in the process.

Early legal input can help buyers identify structural issues before momentum builds.

Stage 2: Heads of Terms / Letter of Intent

Heads of Terms (sometimes called a Letter of Intent) sets out the commercial framework for a deal. It usually outlines the headline price, the proposed deal structure (whether a share or asset purchase), any period of exclusivity, key conditions, and the anticipated timetable.

Although many of its provisions are non-binding, some elements can have legal effect. More importantly, the document establishes the direction of negotiations and can significantly influence leverage as the deal progresses.

Stage 3: Due diligence

Due diligence is often the point at which buyers start to feel the pressure increase. Legal due diligence focuses on reviewing the target business’s key contracts, employment arrangements, intellectual property, property interests, regulatory compliance, and any disputes. The purpose is to identify and understand risk, not to slow the deal down.

Findings from the due diligence process frequently feed into price adjustments, the scope of warranties and indemnities, the overall deal structure, and any conditions that must be satisfied before completion. Ultimately, this stage protects buyers by reducing the risk of unwelcome surprises after completion.

Stage 4: Negotiating the legal documents

This is where the transaction is formally documented.

Key documents typically include:

• the Share Purchase Agreement (SPA) or Asset Purchase Agreement (APA)
• the disclosure letter
• ancillary documents

Negotiation focuses on allocating risk between buyer and seller, particularly around unknown or future issues. This stage can feel intense, as issues identified during due diligence are addressed and commercial pressure builds.

Experienced legal judgement matters most here.

Stage 5: Exchange and completion

Exchange and completion are often confused.

• Exchange is when the parties enter into legally binding commitments.
• Completion is when ownership transfers and funds are paid.

Sometimes these happen on the same day; sometimes completion follows once conditions are met. A well-managed completion should feel controlled and structured, not rushed.

Stage 6: What happens after completion

A transaction does not necessarily end at completion. There are often a number of post-completion matters to address, such as the preparation of completion accounts, ongoing warranty and indemnity claim periods, earn-out arrangements, and any post-sale restrictions.

Understanding these obligations from the outset helps buyers manage both risk and expectations once the deal has completed.

Common misconceptions buyers have

There are several common misunderstandings that can significantly increase risk for buyers. These include assuming the hard work is done once Heads of Terms are signed, treating due diligence as a mere formality, expecting all acquisitions to follow the same timetable, and viewing legal documentation as administrative rather than protective.

Gaining clarity early in the process helps prevent problems later on.

Final thoughts

An acquisition doesn’t have to feel confusing or overwhelming.

With a clear understanding of the process and the right guidance at the right time, buyers can move through each stage knowing what’s happening, what matters, and what to expect next.

Preparation and clarity reduce pressure and help transactions run more smoothly.