M&A Readiness: The Difference Between Closing & Losing a Deal
Entrepreneurs of lower middle market companies are rarely fully prepared when approached by serious, sophisticated buyers. It’s understandable—founders are laser-focused on driving growth and profitability, the very factors that attract buyer interest. But when that interest materializes, buyers expect clean, organized financials that provide both a macro and micro view of the business.
This gap between founder-prepared financials and buyer expectations is common and can be bridged by engaging a seasoned M&A advisor well in advance of a potential transaction. Ideally, this preparation should begin 6–12 months before initiating a sale process—or longer if possible. Proper preparation ensures that when the right buyer comes along, you’re ready to engage from a position of strength, rather than scrambling to fix gaps that could derail a deal.
Therefore, it’s prudent to begin your M&A readiness 6-24 months in advance of a desired transaction so when a strategic buyer or investor shows up, you are ready to engage with your best foot forward, vs. providing half-baked, inaccurate information that will not allow an interested party to proceed without some material level of clean-up and preparation that may cause discussions to go sideways. This also allows founders to be ready to engage at their option vs. the other way around, as well as gain valuable business insights that can support key decision making which is valuable independent of an M&A transaction.
The Risks of Being Unprepared
A few real-life examples illustrate how lack of preparation can erode valuation or kill a deal altogether:
✅ High Hopes, Low Preparation: A founder recently approached us after receiving interest from several reputable strategic buyers. He was excited, expecting valuations similar to what his peers had achieved. But when we asked about his current year projections, he had none—nor did he have the internal resources to create one. To make matters worse, he anticipated a flat year but struggled to articulate the reasons behind it. Without a solid financial narrative or projections, buyer interest quickly cooled.
✅ LOI to Collapse: In another case, we represented a client who went under LOI at a compelling valuation. However, during exclusivity, it became clear that their financials were poorly organized and required a quality of earnings (QoE) review and conversion from cash to accrual. While we managed to smooth out those issues, a bigger problem emerged—actual year-to-date financials fell short of pre-LOI projections. The buyer walked, and despite ultimately finding another buyer at a similar valuation, the experience was a costly lesson in over-optimistic forecasting.
✅ Missed First Impressions: We’ve seen founders present overly complex inconsistent financials that obscure key drivers, or struggle to articulate their business clearly. This lack of clarity not only confuses buyers but can also sow doubt and weaken negotiating leverage.
Why Starting 6–12 Months in Advance Pays Off
By starting the M&A readiness process 6–12 months before engaging with buyers, founders gain:
📈 Stronger Valuation: Buyers reward well-prepared businesses with higher multiples and smoother due diligence.
🕰️ Control Over Timing: Founders can engage when conditions are optimal rather than reacting to unsolicited interest.
💡Better Decision-Making: The process itself yields valuable insights that can inform growth strategies, even if a sale doesn’t happen immediately.
What M&A Readiness Looks Like
Our M&A readiness services are designed to prepare companies at a comfortable pace that doesn’t distract from growth objectives. A typical scope of work includes:
Financial Model Development: Detailed trailing financials and projections with key revenue and expense drivers.
Revenue and Margin Analysis: Segmented by type and customer over 36 months.
Key Metrics Reporting: Including CAC, LTV, churn, net revenue retention, and engagement.
Competitive Landscape and M&A Comps: SWOT analysis and buyer landscape.
Company Presentation: Clear, concise, and ready for investor review.
Data Room Preparation: Organized and buyer-ready.
Accounting Oversight: Partnering with third-party firms for cash-to-accrual conversion and clean-up.
Ready to Get M&A Ready?
We currently have availability for select M&A readiness engagements that are attached to longer-term M&A engagements. If you’re considering a transaction within the next 6–24 months—or want to be prepared for unsolicited interest—reach out for an exploratory conversation. Being ready means presenting your company’s best version when it matters most.