M&A Deal Pipeline Stages Explained

What a pipeline is for

A deal pipeline is the record of where every live opportunity is, what has to happen next and who is doing it. Its stages are the shared vocabulary a team uses to say how far a deal has got, and the value of the vocabulary depends entirely on each stage meaning the same thing every time. A pipeline in which "due diligence" means a request list has been sent to the seller and answered in part is a record. One in which it means "we are keen" is a set of opinions arranged in columns.

The two sides of a transaction run different pipelines through the same events. A buyer moves from finding a company to owning it; an adviser moves from winning a mandate to completing it. The NDA, the memorandum, the offer, diligence and the agreement appear in both, from opposite ends.

Buy-side stages

The acquirer's pipeline is a funnel: many companies sourced, a few reviewed, one or two bought. The stage probabilities are low at the top by design.

Sourced

• Means: a named company that fits the mandate on what is known — sector, size, geography — from a register search, a marketplace listing, an introduction or an inbound approach.
• To leave it: a first screen against the mandate as numbers, with the unknowns listed rather than scored. See how to screen acquisition opportunities.
• Documents and people: public filings, a listing or a teaser; the sourcing team, and no counterparty yet.
• Failure mode: the stage fills with names nobody screens, and the good ones are indistinguishable from the rest.

Screened, and in dialogue

• Means: the company passes the mandate on the figures available, and an approach has been made or a conversation opened.
• To leave it: a non-disclosure agreement signed, and the memorandum or management information received.
• Documents and people: the NDA; the owner or their adviser on one side, the deal lead on the other.
• Failure mode: dialogue with no next step, drifting for months because nobody asked for the NDA.

Under review: NDA signed, memorandum in hand

• Means: the buyer has the information memorandum and is doing the first-pass analysis — extraction, challenge, an early view of price.
• To leave it: a written pursue-or-pass decision with reasons and, for a pursue, an indicative valuation and the questions that would decide it.
• Documents and people: the memorandum, the screening record, the indicative valuation; the analyst and the investment lead.
• Failure mode: the memorandum read front to back and a view formed with no figures extracted, so the offer that follows is struck on the seller's story.

Offer: IOI, then LOI or heads of terms

• Means: the buyer has expressed price in writing — a range in an indication of interest, then a number and terms in a letter of intent or heads of terms. See LOI vs IOI.
• To leave it: heads of terms agreed and exclusivity granted, the price basis stated, the conditions named, and the returns modelled at the offered price.
• Documents and people: the IOI, the management presentation, the LOI; the investment committee, the lender if there is debt, the seller's adviser.
• Failure mode: a number committed to before the returns were run on it, or conditions so vague they protect nobody.

Due diligence

• Means: the request list is out by workstream, the data room is open, responses are being filed and findings recorded. See the due diligence checklist.
• To leave it: every critical item answered; every red flag resolved, priced or carried into the agreement; and the price and structure confirmed or re-set on the findings.
• Documents and people: the request list, the data room, the diligence reports, the revised model; financial, legal, commercial and tax advisers, and the seller's finance team.
• Failure mode: the list sent and not chased, findings discussed and not written, and the stage left because the exclusivity clock ran out rather than because the work was done.

Negotiation and SPA, with funding

• Means: the share purchase agreement is being drafted and negotiated on the diligence findings, the disclosure letter is in progress and the funding is being documented.
• To leave it: the agreement in agreed form, the disclosure letter received, the funding conditions satisfied, and every condition precedent met or waived.
• Documents and people: the SPA, the disclosure letter, the facility agreement, the completion checklist; both sides' lawyers, the lender, and the investment committee for final approval.
• Failure mode: terms left open in the heads of terms are fought over now, when neither side can afford to walk; or a funding condition surfaces late.

Completion

• Means: signed and completed, or signed with completion to follow on the last conditions. The deal record becomes the post-close record: earn-outs, escrows, the working-capital true-up, and obligations with dates.
• To enter it: the agreement executed and the money moved. Nothing should move a deal here by hand.
• Documents and people: the executed agreement and completion statement; the lawyers, the lender and the finance teams.
• Failure mode: the deal marked completed on signing, and the completion-accounts adjustment, the earn-out measurement and the side-letter obligations lost with the file.

Passed and lost

A buyer passes; a seller's adviser loses. Both are terminal stages and both need a reason recorded. A company passed on today at the seller's price is often back in a year at a lower one, and the reasons you passed are the first thing you will want to read. A deal lost to another bidder tells you something about your price, your speed or your credibility — but only if the reason was written down.

Sell-side stages

The adviser's pipeline runs from winning the mandate to completing it. Fewer deals, each carrying more work, and the probabilities rise faster because a seller who has signed an engagement has already decided to sell.

"Lost" on the sell side covers a mandate withdrawn, a seller who changed their mind, or a process that found no buyer at the seller's price. Each is a different lesson, and the record should say which.

Measuring a pipeline

Four measures, described here in concept, tell a team what its pipeline is doing rather than what it feels like.

• Stage conversion: of the deals that entered a stage, the share that left it forwards. It shows where deals die, which is different from where they are slow.
• Stage age: how long each deal has sat in its current stage, against the team's own typical for that stage. A deal well past its typical is stalling, whatever the last meeting felt like.
• Weighted forecast: each deal's value multiplied by a probability set by its stage, summed. It is only as honest as the stage assignments, which is the strongest argument for gating them.
• Health and momentum: two different signals. Health is the state of the record — completeness, recent activity, stage age, known risks. Momentum is the counterparty's direction of travel — reply speed, the questions they ask, attention in the data room, silence after a request. A deal can be healthy on your side and dying on theirs.

Why a stage should be gated on evidence, not dragged

On a kanban board a stage change is a drag. That is the right interaction and the wrong rule. If a deal can be moved to "due diligence" because the sponsor is enthusiastic, the column stops meaning that a request list exists, the weighted forecast becomes a mood, and stage age measures how long ago somebody felt optimistic. A gate makes the stage a claim with evidence behind it: a written decision and a valuation to leave "under review", heads of terms and a returns model to leave "offer", the critical items closed to leave "due diligence".

Gates also make the pipeline auditable. When a deal moved, who moved it and what was true at the time are facts a committee, an investor or a partner can check. And they make automation safe: a system that proposes the next stage can only do so when the gate is met, which is the difference between a pipeline that keeps itself honest and one that moves on its own.

How TrueValue's pipeline does it

TrueValue runs two stage vocabularies on one record, chosen per workspace. The buyer set is Sourced, In Dialogue, NDA Signed, IM Review, Indicative Offer, LOI / HoTS, Due Diligence, SPA & Funding and Completed, with Passed as the terminal stage; the adviser set is Prospect, Initial Contact, NDA Signed, Reviewing, Negotiating, Due Diligence, Closing and Completed, with Lost. Stages are editable per workspace; the record of when a deal moved and who moved it is not.

Each stage carries a playbook of the work it normally involves, and the items marked required are the gate: a deal may leave the stage when every required item is complete — an NDA signed, a valuation saved, an approval recorded. One versioned health score is shown on the kanban card, the deal page and the API, so the three cannot disagree, and a separate momentum verdict — steady, drifting or dying — is read from the counterparty's behaviour: reply latency in the mail filed on the deal through the M&A CRM, what they ask, attention in the data room, and silence after a request. A closure forecast starts from the deal's place in your own pipeline and is moved by those signals, with the stages still to pass as its critical path.

The TrueValue Agent reads the same pipeline. It reviews every live deal, files findings with evidence, and proposes the next stage move only when that stage's gate is met — exactly the next stage, never a skip, never a retreat, and never into completed, lost or passed. The proposal waits for a person, and like every action the Agent takes it leaves a receipt with an undo.