How to Prepare Your Company for M&A: Key Steps & Metrics

How to Prepare Your Company for M&A: The Metrics, Risks, and Moves That Matter Most

For founders of mid-market companies, M&A is often framed as a single event: sell the business, buy a competitor, close the deal, move on.

In reality, a transaction is less like a single decision and more like a high-stakes operating test. Buyers scrutinize your margins, your customer concentration, your systems, your contracts, your accounting practices, and even your ability to explain why your customers will stay after the deal closes. Sellers, meanwhile, often discover too late that valuation is only one piece of the puzzle. Deal structure, working capital, earnouts, and post-close execution can materially change the outcome.

In the presentation, M&A advisors Mel Inger and Don Pfleat outlined what separates smooth, value-maximizing transactions from messy, disappointing ones. Their discussion centered on the middle market, with specific experience in print and manufacturing-related businesses, but the lessons apply broadly to founders preparing for a sale, acquisition, recapitalization, or ownership transition.

This article distills those lessons into a practical framework for leaders in the $500K to $10M+ revenue range and adds context around what the metrics really mean for enterprise value.

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Key Takeaways

• The M&A market remains active, with continued buyer interest from strategic acquirers and private equity groups.
• EBITDA still anchors valuation, but the multiple depends heavily on niche strength, margin quality, growth potential, and risk concentration.
• Preparation often starts years before a sale, not months before a letter of intent.
• Working capital is one of the most overlooked value levers and can shift proceeds by hundreds of thousands of dollars.
• Customer concentration above 20% can narrow the buyer pool, unless management can clearly prove customer stickiness.
• Higher-quality earnings matter more than headline revenue, especially when EBITDA margins reach the 10% to 15% range or better.
• Deal structure can change net proceeds dramatically, particularly through taxes, earnouts, seller notes, and rollover equity.
• Due diligence is not just the buyer’s job; sellers also need to vet buyers and protect themselves post-close.
• Most transactions take longer than owners expect, often 7 to 12 months from launch to close.
• A written post-close transition plan is essential, especially for payroll, vendor communication, customer continuity, and banking changes.

The M&A Market Is Busy, Even When People Expect It to Slow

One of the more useful observations from the discussion is that the market has remained active despite repeated predictions of a slowdown.

That matters because many owners delay planning based on macro headlines. They assume elections, rates, tariffs, or general uncertainty will freeze activity. According to the speakers, that has not been the pattern. The market may fluctuate, but capital is still looking for deals, especially in lower-middle-market and middle-market businesses.

Their experience also aligns with a broader truth in private markets: when organic growth is hard to achieve, acquisition becomes the alternative growth engine. For founders, that creates opportunity on both sides:

• Sellers may find more qualified interest than expected
• Buyers may face more competition for attractive targets
• Owners considering a future exit should assume the market may reward preparation, not just timing

The more important implication is this: you should not wait for a "perfect" market to get ready. By the time market conditions feel ideal, the strongest companies are already prepared and in motion.

Valuation Starts With EBITDA, But Multiples Tell Only Part of the Story

A large share of lower-middle-market transactions are priced using an EBITDA multiple. That is familiar territory for most founders. What is less understood is how wide the range can be.

The speakers noted that they have seen deals span from roughly 3.5x to 12x EBITDA, depending on business model, margins, niche, size, and strategic fit. That spread should be a wake-up call for founders who rely on rules of thumb.

What actually drives the multiple?

According to the discussion, the biggest factors include:

1. A premium niche

Specialized, defensible capabilities earn more attention and often higher valuations. Examples mentioned included complex work, certifications, regulated markets, and offerings that are hard for customers to replace.

For non-print founders, this translates to questions like:

• Do we solve a mission-critical problem?
• Are we difficult to replicate?
• Do our processes, certifications, or embedded systems create switching friction?
• Do we serve an attractive vertical with high compliance or technical barriers?

A business with a commodity offering may still sell well, but a business with pricing power and customer stickiness is far more likely to command a premium.

2. EBITDA margin quality

The presenters highlighted 10% to 15% EBITDA margins as attractive and noted that businesses in the 20% range can command exceptional attention, especially when paired with a strong niche.

This is a crucial distinction for growth-stage founders. Revenue growth alone is not enough. Buyers want evidence that growth converts into durable cash flow.

3. Revenue scale

Larger businesses generally command better multiples. The speakers noted a meaningful step-up once revenue surpasses $10 million, which reflects a common market dynamic: larger companies are usually perceived as less risky, more scalable, and more attractive to institutional buyers.

4. Growth potential

Buyers care about history, but they get excited about future expansion they believe they can unlock. A flat but stable company may still be highly valuable if the acquirer sees clear upside through capital, sales infrastructure, capacity utilization, or cross-selling.

This is especially relevant for founder-led firms that have strong operations but underdeveloped go-to-market systems.

5. Customer concentration

If one customer represents 20% or more of revenue, buyers pay attention immediately. Some will walk away. Others will proceed if management can make a strong case for why the relationship is durable.

This is not just about concentration percentages. It is about whether the seller can explain:

• Why the customer stays
• What operational integration exists
• How hard it would be to switch vendors
• Whether the relationship is contractual, habitual, technical, or strategic

6. Capital expenditure and technology upkeep

A buyer will ask whether equipment, systems, or infrastructure have been maintained. Deferred capex creates friction because the buyer may reduce value to account for upcoming investment needs.

7. Workforce and key talent

In a tight labor market, an experienced workforce can be a hidden asset. If a company has specialized employees, low turnover, and operational depth beyond the founder, that increases confidence.

The Biggest Mistake Sellers Make: They Underestimate the Process

One of the clearest messages from the presentation was simple: most owners underestimate how much work an M&A process requires.

That underestimation shows up in several ways:

• Assuming a clean business will close quickly
• Believing due diligence is mostly financial
• Failing to prepare documentation in advance
• Overlooking deal structure and tax impact
• Using advisors who lack transactional experience

The speakers said many owners believe a deal should take only a few months. In practice, 7 to 12 months is more realistic, and some deals run much longer.

For founders, this has two practical implications.

First, readiness is a value driver

If management is organized, responsive, and prepared, it creates trust. Trust helps preserve negotiating leverage.

If buyers sense disorganization, missing records, inconsistent accounting, or confusion around key terms, they may not walk away immediately, but they often reduce price, demand protections, or tighten structure.

Second, transaction fatigue is real

By the later stages of a deal, sellers are tired. They want the process over. Sophisticated buyers know this. That fatigue is one reason late-stage negotiation points can become so consequential.

The lesson: build your defenses before you need them.

Start Exit Planning Earlier Than Feels Necessary

A valuable point from the discussion is that exit planning should not begin when you are "ready to sell." It should begin while you are still building.

For founders, that means treating value creation and exit readiness as a normal part of ownership, not as a last-minute project.

A three-to-five-year planning horizon is ideal because it gives you time to improve the variables buyers care about:

• Margin quality
• Revenue mix
• Customer concentration
• Leadership depth
• Financial reporting
• Systems and controls
• Recurring or repeatable revenue streams

Even if your exit is not imminent, knowing what your business would look like through a buyer’s lens can sharpen operating decisions today.

Buyers: Casual Interest Rarely Beats a Proactive Acquisition Strategy

The presentation also offered a useful framework for acquisitive companies. Not every company is a real buyer. Some are merely open to opportunities. Others actively run a strategy.

The difference matters.

Casual buyers tend to:

• Wait for opportunities to come to them
• Evaluate only marketed deals
• Compete in broader auctions
• Move reactively rather than strategically

Proactive buyers tend to:

• Define clear acquisition criteria
• Build financial models in advance
• Identify off-market targets
• Reach out directly to owners
• Pursue opportunities before competition appears

That proactive approach can be a major advantage in the lower middle market, where many owners are not formally "for sale" but may be open to the right conversation.

For founders considering acquisitions, the practical takeaway is this: clarity beats opportunism.

Before reaching out to targets, define:

• Ideal size range
• Geography
• Capability gaps to fill
• Capacity needs
• Customer or vertical fit
• Integration tolerance
• Minimum ROI threshold

Without that discipline, acquisitions become expensive distractions.

Why "Quality of Earnings" Matters More Than Owners Expect

When sellers think about valuation, they often focus on historical P&Ls. Buyers go deeper. They want to understand normalized EBITDA.

That means stripping out items that are unusual, non-recurring, discretionary, or not reflective of future operating reality. Examples mentioned in the presentation included:

• Excess owner compensation
• Above- or below-market rent
• One-time consulting or legal fees
• Duplicative positions
• Relocation or transaction-related costs

Many owners insist their books are "clean." The speakers pushed back on that assumption. In their experience, nearly every company has adjustments worth analyzing.

This matters because normalized EBITDA often becomes the basis for valuation. If EBITDA is understated and unsupported, the seller may leave money on the table. If adjustments are aggressive and poorly documented, the buyer will challenge them.

For founders, the right question is not "Are our books clean?" It is:

Can we clearly defend what normalized earnings should be and why?

Working Capital: The Quiet Deal Term That Can Cost You a Fortune

If there is one area founders routinely underrate, it is working capital.

The speakers treated this as one of the most important and misunderstood parts of a deal. That emphasis is warranted.

In many transactions, the purchase price assumes the business will be delivered with a "normal" or "adequate" level of working capital. If actual working capital at close falls below that target, the purchase price gets reduced. If it exceeds the agreed target, the seller may deserve more value.

That sounds straightforward. It is not.

Why working capital becomes contentious

Because buyers and sellers often define the target differently.

A buyer may prefer:

• A higher target
• A broader inclusion of current assets
• A narrower inclusion of liabilities
• Historical averages that favor the buyer

A seller should focus on:

• What is truly adequate to run the business
• Whether historical balances include excess working capital
• Which accounts should count
• Whether seasonal swings distort the picture

One example from the presentation described a dispute where the difference in target working capital was $500,000. That is not a rounding error. It is a meaningful transfer of value.

For many founder-led companies, this becomes a hidden erosion point because management pays attention to headline price and glosses over the working capital clause in the LOI.

That is a mistake.

Founder checklist for working capital readiness

Before going to market, analyze:

• Monthly working capital trends over at least 12 months
• Seasonal patterns
• Excess cash-like or operationally unnecessary current assets
• Slow-moving inventory
• Collection cycles
• Deferred revenue treatment
• Customer deposits
• Prepaids and accrual consistency

The real issue is not just arithmetic. It is negotiating power through preparation.

Accounting Errors and Non-GAAP Practices Can Become Legal Risk

Another strong caution from the discussion: financial statements that "work fine internally" may not hold up under transaction scrutiny.

This is especially relevant for businesses with:

• Informal revenue recognition practices
• Lease accounting shortcuts
• Inconsistent inventory treatment
• Weak accrual processes
• Poor documentation of customer deposits or prepaids

Why does this matter? Because sellers typically make representations in purchase agreements about the accuracy of financial statements. If those statements later prove misleading, the issue can move from accounting cleanup to post-close indemnification risk.

The takeaway is not that every company needs public-company reporting. It is that if you are approaching a deal, you should understand where your reporting differs from expected standards and address those issues before a buyer uses them against you.

Deal Structure Can Matter Almost as Much as Purchase Price

A founder who receives a strong headline offer may still end up disappointed if the structure is unfavorable.

The speakers highlighted several structural levers that affect seller outcomes:

Purchase price allocation

Buyers and sellers often want different tax outcomes.

• Sellers usually prefer more value allocated to goodwill, often taxed more favorably
• Buyers often prefer allocations that generate faster deductions, such as equipment or certain amortizable assets

This is one reason enterprise value alone does not tell you what you will actually keep.

Seller notes

A portion of the purchase price may be deferred and paid over time by the buyer.

Earnouts

These are common, especially when future revenue retention is uncertain. The presenters suggested many tuck-in deals include earnout provisions.

Earnouts are not inherently bad, but they are only as good as their definitions. Sellers need clarity around:

• Measurement period
• Revenue or EBITDA definitions
• Which customers count
• Whether revenue can be shifted across plants, divisions, or entities
• Reporting rights
• Payment timing

Rollover equity

Sometimes the seller reinvests part of proceeds into the acquiring platform. This can be powerful if the second bite of the apple materializes, but it introduces risk and complexity.

For founders, the lesson is straightforward: optimize for after-tax, actually realizable proceeds, not just announced value.

Due Diligence Is Also a Seller Discipline

Most sellers think of due diligence as something done to them. The presentation correctly reframed it as something sellers should do as well.

A seller should evaluate:

• Is the buyer financially capable of closing?
• Do they have a credible integration plan?
• Are they overpromising on culture, retention, or continuity?
• If part of the deal includes notes, earnouts, or rollover equity, how trustworthy and sophisticated are they?

This matters because not all buyers are equally prepared. A poorly organized buyer can create operational damage even if the deal closes.

The presenters also noted that sellers do not have to accept every diligence request without challenge. Buyers often ask for broad sets of materials, some relevant and some not. Sellers should be responsive, but they should also be thoughtful.

Efficient diligence is not about withholding information. It is about maintaining control and avoiding unnecessary chaos.

Don’t Overlook Reps, Warranties, and Disclosures

Founders often spend months negotiating economics and then mentally check out when the legal documents arrive.

That is dangerous.

Representations, warranties, disclosures, indemnification caps, and survival periods govern what happens if something goes wrong after closing. These provisions can determine whether a seller keeps proceeds or gives some back.

A practical insight from the presentation is that many routine obligations are easy to forget. Sellers may initially say they have "almost no contracts", only to later uncover:

• Software agreements
• IT maintenance arrangements
• Service contracts
• Equipment commitments
• Vendor obligations
• Facilities-related service agreements

Those details matter because they affect what the buyer is actually assuming.

For founder-led businesses, this is another reason to organize a full contract inventory well before a transaction begins.

The Deal Is Not Over at Closing

Many owners think closing is the finish line. Operationally, it is often the start of the most delicate phase.

The speakers emphasized the importance of a written transition plan, especially around:

• Payroll setup
• Banking transitions
• Vendor updates
• Customer communication
• Employee communication
• Reporting changes
• Ownership handoff responsibilities

Without a clear plan, even basic processes can break. The presentation mentioned a case where payroll was not properly arranged after closing. That may sound like an integration mistake, but it is also a trust and morale failure.

For buyers, poor transition planning can damage the asset you just bought.

For sellers, a weak transition can jeopardize earnouts, customer retention, and legacy.

What Founders Should Do 12 to 36 Months Before an M&A Process

If you want to improve optionality and reduce deal risk, focus on the following long before a formal process begins.

Operational priorities

• Improve EBITDA margins and eliminate avoidable cost leakage
• Diversify top customers where possible
• Increase recurring or repeat revenue visibility
• Reduce founder dependence in key workflows
• Build a second layer of management
• Document processes and customer relationships

Financial priorities

• Produce timely, reliable monthly reporting
• Normalize compensation, rent, and discretionary spending
• Clean up the balance sheet
• Review revenue recognition and inventory practices
• Analyze working capital trends monthly

Strategic priorities

• Clarify your differentiated niche
• Articulate your growth story credibly
• Identify what a strategic buyer could unlock that you have not
• Understand whether your value is based on cash flow, capability, customer access, or platform potential

Transaction priorities

• Model after-tax proceeds under multiple deal scenarios
• Understand the tradeoffs between all-cash, earnout, note, and rollover structures
• Inventory all material contracts and obligations
• Prepare management for diligence questions

A Practical Way to Think About M&A Readiness

A useful way to frame preparedness is through four questions:

1. Is the business attractive?

Can you demonstrate strong margins, stable cash flow, a differentiated offering, and real customer retention?

2. Is the business understandable?

Can a buyer quickly understand how revenue is generated, how customers are retained, how costs behave, and where growth can come from?

3. Is the business transferable?

Can the company function without daily founder heroics? Are systems, contracts, talent, and relationships institutionalized enough to survive ownership change?

4. Is the deal defendable?

Can you support your EBITDA adjustments, working capital position, accounting methods, and post-close representations with documentation?

If the answer to any of these is weak, that does not mean a transaction is impossible. It means value may be discounted, structure may get more complicated, or the buyer pool may narrow.

Conclusion

The strongest message from the presentation is not that M&A is complicated, although it is. It is that value is won or lost in preparation, not just negotiation.

A company does not become "sale-ready" when the owner decides to exit. It becomes sale-ready when its financial story is credible, its operations are transferable, its risks are understood, and its management team is prepared for scrutiny.

For growth-minded founders, that insight is useful even if a transaction is years away. The disciplines that improve M&A outcomes - better margins, clearer reporting, stronger customer retention, healthier working capital, less owner dependence - are the same disciplines that make a company stronger right now.

And that may be the most important takeaway of all: preparing for M&A is not just about getting a deal done. It is about building a business that deserves better options.

Source: "Financial Executives Council - 6.04.2026 - Mergers & Acquisitions" - Printing Industry Midwest, YouTube, Jun 4, 2026 - https://www.youtube.com/watch?v=0B6Eanja0_8

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