Most founders think exit prep starts when you get an LOI. By then you’re already behind.
I recently closed a sell-side PE transaction for a manufacturer — just north of $300M. It was a clean deal. But clean deals don’t happen by accident, and the reason this one closed without surprises was almost entirely about what the finance team had built in the 18 months before a buyer ever came to the table.
What Gets Tested in a Serious Quality of Earnings Process
Revenue quality. Buyers will reclassify anything that looks one-time, customer-concentrated, or dependent on a relationship that doesn’t transfer. If you can’t defend the repeatability of your top-line, expect a multiple haircut.
EBITDA adjustments. Every add-back gets challenged. Owner comp, one-time expenses, proforma initiatives — buyers have seen every version of these and they’ll push back hard on anything that looks aggressive. The defense isn’t the number, it’s the documentation.
Net working capital. The NWC peg negotiation moves real dollars at closing. Most sellers leave money on the table here because they haven’t modeled it properly or set expectations early enough in the process.
The finance team’s credibility. This is the one nobody talks about. When a buyer asks a question and finance can answer it in 24 hours with clean support, the deal moves. When the answer takes a week and comes back with caveats, confidence erodes. That erosion is expensive.
The companies that exit well aren’t the ones that scramble hardest during diligence. They’re the ones that built an investor-ready back office before they needed one.
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If an exit is on your horizon, let’s make sure your finance function is ready before the process starts.
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