Before entering M&A discussions, founders need to understand that preparation determines outcomes far more than negotiation skill does. The most common reason deals fall apart or deliver less value than expected is not a bad negotiating position – it is a lack of financial readiness, unclear strategic rationale, or assumptions that do not hold up under scrutiny. The sections below walk through the key questions every founder should be able to answer before sitting across the table from a buyer, investor, or merger partner.
What financial information do buyers typically request first?
Buyers almost always begin with three to five years of audited or reviewed financial statements, current management accounts, and a forward-looking financial model. They want to understand revenue trends, margin development, cash flow quality, and the reliability of your numbers before committing any further time or resources to the process.
Beyond the headline figures, buyers look closely at the composition of revenue. Is it recurring or project-based? Concentrated in a handful of clients or diversified? They will also examine working capital dynamics, debt obligations, and any off-balance-sheet commitments that could affect the deal structure or price.
Founders who have clean, well-organized financial records move through this phase significantly faster than those who need to reconstruct historical data during the process. Preparing a data room in advance – with consistent reporting, clear accounting policies, and documented assumptions in your financial model – signals professionalism and builds buyer confidence from the first interaction.
How is company valuation determined in an M&A deal?
Company valuation in an M&A deal is determined through a combination of methods, most commonly EBITDA multiples, discounted cash flow analysis, and comparable transaction benchmarks. The method used depends on your industry, the buyer’s profile, and the strategic rationale behind the deal.
EBITDA multiples are the most widely used starting point in mid-market transactions. A buyer will apply a multiple to your normalized EBITDA – which means stripping out one-off costs, owner-specific expenses, and non-recurring items – to arrive at an enterprise value. That multiple is shaped by sector dynamics, growth trajectory, customer concentration, and how defensible your business model is.
Valuation is not just a number – it is a negotiation anchored in assumptions. Buyers will stress-test your projections and apply discounts for risks they identify. Founders who understand the drivers of their own valuation, and who can defend their assumptions with data, are in a much stronger position to protect value during negotiations. Entering discussions without a clear view of your valuation range is one of the most avoidable mistakes in any M&A process.
What are the most common deal structures founders encounter?
The most common deal structures in M&A transactions are share sales, asset sales, and earnouts, often combined in different ways depending on the buyer’s risk appetite and the seller’s goals. Each structure has different implications for tax, liability, and how and when you receive your proceeds.
Share sale vs. asset sale
In a share sale, the buyer acquires the entire legal entity, including its history, contracts, liabilities, and obligations. This is the most common structure for full acquisitions and is generally simpler for the seller from a continuity perspective. In an asset sale, the buyer selects specific assets and liabilities to acquire, which gives them more control but can create complexity around transferring contracts, employees, and licences.
Earnouts and deferred consideration
An earnout is a mechanism where part of the purchase price is paid after closing, contingent on the business hitting agreed performance targets. Buyers use earnouts to bridge valuation gaps and share risk. For founders, earnouts can be attractive when you believe strongly in future performance – but they require very clear definitions of what gets measured, over what period, and who controls the variables that affect the outcome. Poorly structured earnouts are a frequent source of post-deal disputes.
What does due diligence actually involve for a founder?
Due diligence is the buyer’s structured process of verifying everything they have been told about your business before finalizing the deal. For a founder, it means providing detailed documentation across financial, legal, operational, commercial, and sometimes technical areas – typically through a secure data room over several weeks over a period of several weeks.
On the financial side, buyers will verify your historical performance, scrutinize the quality of earnings, assess working capital normalization, and review tax compliance. Legal due diligence covers contracts, intellectual property, employment agreements, and any pending disputes. Commercial due diligence examines your market position, customer relationships, and competitive dynamics.
The experience of due diligence can feel intrusive, especially for founders who have not been through it before. The key is to approach it as a collaborative process rather than an interrogation. Gaps or inconsistencies discovered during due diligence rarely kill deals outright, but they do shift negotiating power. Founders who surface issues proactively – rather than letting buyers find them – tend to maintain more control over how those issues are priced or resolved.
When should a founder bring in external financial advisors?
A founder should bring in external financial advisors before entering any substantive M&A discussions – ideally six to twelve months before a planned process begins. Waiting until a buyer is already at the table puts you at an immediate structural disadvantage, because the other side almost certainly has experienced advisors already shaping the process.
Early involvement of advisors serves several purposes. They can assess your deal readiness, identify gaps in your financial reporting or data quality, help you build a credible financial model, and establish a realistic valuation range before you commit to any number in conversation. They also help you think through strategic fit and whether a particular deal actually makes sense – not just whether it can be done.
The right advisor brings more than transaction experience. They bring independent judgment on whether a deal should proceed at all, which is especially valuable when founders are emotionally invested in a particular outcome. An advisor who challenges your assumptions before a buyer does is protecting your interests, not complicating the process.
How we help founders navigate M&A
We work with founders throughout the full M&A journey – from the earliest strategic thinking through to post-deal integration. Our approach is built around a CFO perspective: we focus not just on whether a deal can be done, but whether it should be done, and how to structure it so that value is actually realized after closing.
Practically, this means we support founders with:
- Finance Maturity Assessment: a clear-eyed review of your financial readiness before any process begins, identifying gaps that buyers will find and helping you close them first
- Investment thesis and strategy: defining the strategic rationale, target profile, and valuation framework so you enter discussions with clarity and discipline
- Independent validation: stress-testing assumptions and financial models before you commit to any position in a negotiation
- Due diligence coordination: managing the process on your side so it is structured, efficient, and does not disrupt your business
- Integration and value realisation: ensuring that once the deal closes, the value you negotiated for is actually delivered
If you are considering an acquisition, planning an exit, or simply want to understand what it would take to be deal-ready, we are happy to have a concrete, no-obligation conversation. Get in touch with our team to find out where you stand.
Frequently Asked Questions
How long does a typical M&A process take from start to finish?
A well-prepared M&A process typically takes six to twelve months from the first substantive buyer conversation to deal closing, though this varies significantly based on deal complexity, buyer type, and how ready your business is at the outset. Founders who begin preparation early — cleaning up financials, organizing a data room, and establishing a clear valuation rationale — can compress timelines considerably. Rushed processes, on the other hand, tend to produce worse outcomes: lower valuations, more aggressive deal terms, or deals that fall apart entirely during due diligence.
What is a 'quality of earnings' report and do I need one?
A quality of earnings (QoE) report is an independent analysis of your financial performance that verifies the sustainability and accuracy of your reported earnings — most critically, your EBITDA. It adjusts for one-off items, owner-specific costs, and accounting policies that could distort the true picture of the business. While buyers will commission their own QoE during due diligence, founders increasingly commission a sell-side QoE in advance, which surfaces issues before buyers find them, strengthens your negotiating position, and signals transparency — all of which help protect valuation and reduce deal risk.
What are the most common reasons M&A deals fall apart after terms are agreed?
The most frequent deal-breakers after heads of terms are signed fall into three categories: issues uncovered during financial or legal due diligence (such as revenue restatements, undisclosed liabilities, or customer concentration risks), a breakdown in valuation alignment when buyer assumptions diverge from the seller's model, and key-person or operational dependency concerns that make the buyer question business continuity post-deal. Many of these are preventable with proper preparation — identifying and addressing vulnerabilities before entering the process gives you the opportunity to resolve them on your own terms rather than under buyer pressure.
How do I handle approaches from potential buyers who contact me directly?
Unsolicited approaches should be treated with discipline, not urgency. The fact that a buyer has approached you directly does not mean their offer reflects full market value — in many cases, it means the opposite, since they are attempting to acquire you before you run a competitive process. Before engaging substantively, make sure you have a clear sense of your valuation range, understand the buyer's strategic rationale, and have advisors in place to manage the process. Responding without preparation, or sharing financial information before protections are in place, can compromise your negotiating position significantly.
What is the difference between enterprise value and equity value, and why does it matter for founders?
Enterprise value (EV) is the total value attributed to the business as a whole, while equity value is what the founder actually receives after accounting for debt, cash, and other balance sheet adjustments. The gap between these two figures can be substantial — particularly if the business carries debt or has working capital requirements that are factored into the deal mechanics. Founders sometimes anchor on the headline enterprise value quoted early in discussions without fully understanding the adjustments that will be applied at closing, which is why having an advisor model the equity bridge before you agree to any number is critical.
Should I tell my management team about a potential M&A process?
This is one of the most sensitive judgment calls in any deal process, and there is no universal answer. Disclosing too early can create anxiety, distraction, or retention risk — especially if the deal does not proceed. However, key finance and operations leaders are often essential to preparing the data room and supporting due diligence, making some level of disclosure unavoidable. A common approach is to involve only the minimum number of people necessary at each stage, with clear confidentiality expectations, while having retention plans or deal incentives ready to deploy once the process becomes more certain.
What happens to my role and responsibilities after the deal closes?
Post-deal expectations vary widely depending on the deal structure and buyer type. Strategic acquirers often want the founder to remain involved for a defined transition period — typically one to three years — to preserve relationships, institutional knowledge, and operational continuity. Private equity buyers may want founders to remain in an active leadership role and co-invest in the next phase of growth. In either case, your post-closing role, reporting lines, autonomy, and any earnout conditions should be clearly defined in the deal documentation before signing — vague arrangements are a common source of post-deal friction.