Jennifer M. Settles is the Managing Partner of the Law Office of Jennifer M. Settles in Phoenix, Arizona, where she brings over 25 years of experience to every client relationship. She advises clients on complex business transactions, guiding everyone from first-time entrepreneurs to seasoned executives through their most critical business decisions.
Jennifer’s diverse background spans regional and international law firms as well as in-house corporate counsel roles with major corporations. This breadth of experience allows her to see around corners and anticipate challenges before they become problems. Whether you’re a founder scaling rapidly, a small business navigating complex transactions, or a leader planning your exit strategy, Jennifer brings the right combination of legal skill and business acumen to your situation.
In a recent WIE Suite Masterclass, Settles walked founders through the legal and strategic landscape of selling a business, with clear-eyed guidance on where value gets protected and where it quietly disappears.
The most preventable mistakes in any exit are the ones that surface during due diligence because they were never addressed in advance. Settles was direct: "You don't prepare for a sale in the quarter leading up to the sale." Depending on a company's size and complexity, getting deal-ready can take two to three years.
That preparation spans financial documentation (most buyers and lenders require three years of clean financials and tax returns), but it extends well beyond the numbers. Buyers scrutinize whether a business can operate without its founder, whether intellectual property is properly owned by the company, and whether the cap table is clean and legible. Each gap discovered during diligence either reduces enterprise value or shifts more of the purchase price into deferred, higher-risk payout structures. Addressing these issues early is the most direct lever a founder has over their final outcome.
Founders understandably anchor on valuation, but the purchase price printed in a term sheet and the amount that lands in a bank account are rarely the same figure. Settles illustrated this with a clear example: a $5 million purchase price can, after escrow holdbacks, earnouts, a seller note, working capital adjustments, debt payoff, taxes, and transaction fees, net closer to $2.1 million in actual proceeds at closing.
Each of those deferred components carries its own risk profile. A seller note, for instance, transforms the founder into a subordinate lender. "You're probably at the bottom of the debt stack," Settles explained, "so if there's a liquidity issue, your note will be the first to be unpaid." Earnouts are even more contingent, with payment dependent on thresholds the founder no longer controls. Her guidance: always push to tie earnouts to top-line revenue rather than profit, which can be influenced by the buyer's own spending decisions after closing.
Many founders treat the Letter of Intent as a preliminary, low-stakes document. Settles pushed back on that framing. While deal terms in an LOI are non-binding, the exclusivity clause is binding, and it meaningfully shifts negotiating leverage to the buyer from the moment it is signed.
During exclusivity, a seller cannot engage with other potential buyers. Deals routinely extend past the initial exclusivity window, and sellers who are deep into a process rarely have the appetite to walk away and start over. "The longer you are invested with one buyer, the more deeply you are entrenched with them, and the harder it is to turn around and say no." Her recommendation is to build milestone checkpoints directly into the exclusivity period so buyers are held to a defined pace and sellers retain some measure of control over the timeline.
The purchase and sale agreement is where risk gets formally allocated between parties, and there are several provisions that deserve particularly close attention. Representations, warranties, and disclosure schedules are a founder's legal shield. The more thorough and accurate those disclosures, the more protected the seller is against future indemnification claims. Notably, information shared in a data room does not substitute for proper disclosure in the schedules themselves.
Indemnification provisions determine how long a buyer can bring claims after closing and up to what dollar amount. Settles noted that buyers will often seek personal guarantees from founders to back those obligations, since the selling entity typically distributes its proceeds and holds no remaining assets. One middle-ground solution she has used successfully: having the seller maintain an insurance policy post-closing so that any indemnification claim is made against an insured entity rather than the founder personally. Offset rights, which allow buyers to deduct claimed amounts from seller note payments or escrow, are another area where founders can find themselves at a disadvantage if the provisions are not clearly negotiated with proper notice and dispute resolution processes in place.
Due diligence, Settles observed, is the buyer's opportunity to validate their price, search for issues, and recalibrate risk. It is also the phase where leverage continues to shift toward the buyer with every discovery. The most effective counter is preparation and proactive disclosure. "If there are issues, and there will be, be prepared to explain them. If you don't provide that context, the buyer will fill in the explanation themselves, and that's when things can get out of hand."
Founders can conduct mock due diligence reviews years before a sale using publicly available checklists across financial, legal, HR, IT, and operational categories. Identifying gaps on your own timeline, and closing them, is far preferable to having them surface mid-process. Transparency builds trust, preserves momentum, and keeps the founder in a position to shape how the story gets told.
