FAQ

Start the conversation early. We like to have at least two to three years before a sale, and at least 5 years before a desired retirement date so we can understand your objectives and help prepare the business to meet them. Whether that means cleaning up the financials, reducing owner dependency, or strengthening the management team, this preparation is what gives you choices on timing, buyer, and terms.

There are two distinct phases. Planning comes first and is separate from the sale itself. It covers readiness, valuation, and improving the areas that affect transferability, and it often runs well before you go to market. The sale process begins with creating the pre-marketing materials, the teaser and the confidential information memorandum, then moves into a competitive process with a curated buyer list, soliciting offers, a letter of intent, due diligence, and closing. That second phase typically runs six to twelve months from launch to closing.

Expect meaningful time investment, especially during buyer meetings and due diligence, though a good advisor handles most of the day-to-day process work. One of the biggest demands on your time is gathering and providing information, since much of what buyers ask for can only come from you or your finance team. Building a small internal deal team, typically your CFO or controller plus one or two trusted people, spreads that load, keeps responses to buyers fast and consistent, and lets you stay focused on running the business, which is what tends to produce the better outcome.

Start with two things: owner dependency and financial reporting. Buyers pay more for a business that runs without you, so moving relationships, decisions, and day-to-day execution to your team lowers the risk they are underwriting and widens the pool of buyers who can pursue the deal. Clean, timely financials do the same on the diligence side. Verifiable numbers allow buyers to put their best foot forward and often shorten the time to close. Both efforts also give you a much deeper understanding of your own business, and that understanding usually surfaces the next set of improvements worth making, whether or not you end up selling.

Multiples vary widely by industry, and within the same industry they vary based on size, risk profile, and growth opportunities. Applying a multiple from your industry’s range may be useful for personal financial planning, but setting a real valuation expectation takes a fuller understanding of your business characteristics. Ask us about our industry spotlights, which are useful for setting an initial estimate and for understanding the common value drivers within your industry.

Yes, and the earlier the better. Your CPA can clean up the financials, identify tax exposures, and model how different deal structures affect your after-tax proceeds, while your financial advisor can tell you what those proceeds need to look like to fund your life after the sale. Bringing them in before you go to market, rather than after an offer arrives, leaves time to act on what they find.

Most of the purchase price is typically paid at closing, with any escrow, rollover, earnout, or seller financing portions paid out later based on the agreed schedule. Your attorney and advisor will outline the exact payment timeline in the purchase agreement.

Usually yes. In lower middle market deals it is common for the operating company or a related entity to also own its real estate, and the two need to be decoupled because they price differently. Get a read on value early by looping in a commercial broker for an opinion of value or appraisal, then weigh your options before going to market: sell the real estate to the buyer, enter a long-term lease with them, or execute a sale-leaseback with a third-party investor. Plan for taxes as well, since depreciation recapture, 1031 eligibility, and DST options all deserve a conversation. Reach out for a free consultation on transaction impacts of owned real estate.

Just like valuation, your buyer pool depends on the underlying characteristics of your business. Generally speaking, the larger you are, the more likely you are to be acquired by a strategic buyer or a private equity group, given their access to capital, deal experience, and sophisticated management teams. As M&A advisors, we focus primarily on sourcing institutional buyers, meaning other operating companies and various forms of private equity such as family offices or committed funds. We can further supplement the buyer pool with individuals, search funds and other buyer types as it aligns with your objectives.

A strategic buyer is another operating company, often a competitor, a supplier, a customer, or a company in an adjacent market, and it buys for synergies such as new customers, new products, geographic reach, or scale in its existing operations. A financial buyer is investing for a return and usually keeps the business running with existing management. Private equity covers a range of these buyers, including family offices investing their own capital, traditional buyout funds with outside investors and a fixed fund life, and independent sponsors who source a deal first and raise the equity for it deal by deal. In the lower middle market the two categories often blur, and the buyer is frequently an operating company backed by some form of private capital.

All three are worth evaluating alongside a third-party sale. An ESOP can defer and ultimately eliminate capital gains tax through a 1042 election, rewards the employees who built the business, and lets you step back gradually. A management buyout keeps the business with people who already know it and usually moves faster with less disruption. A family transfer preserves ownership across generations and opens estate and gift planning strategies a third-party sale does not. Each option depends on specific conditions, an ESOP on employee count and cash flow to support the debt, an MBO on a management team with the appetite and credit to buy, a family transfer on a next generation that wants to run the business. All of them take time to execute, which is why exit planning should start five years out rather than five months out.

Expect to provide three to five years of financial statements and tax returns, monthly financials and bank reconciliations, an accounts receivable and payable aging, customer and vendor contracts, your top customer concentration detail, employee census and compensation records, benefit plan documents, leases, loan and equipment agreements, insurance policies, litigation history, licenses and permits, and corporate records such as the operating agreement, cap table, board minutes, and stock or unit transfer history. Organizing these in advance does more than speed up the process. It surfaces problems while you still have time to fix them, unsigned operating agreements, contracts that were never countersigned, missing board consents, expired leases, or customer agreements that do not assign to a buyer. Finding those with us months ahead is a cleanup item. Finding them in diligence is leverage for the buyer.

A QoE report is an independent analysis that tests whether your reported earnings and add-backs are accurate and sustainable. It goes well beyond the income statement, examining revenue recognition, customer and margin trends, working capital, one-time items, and tax exposure such as whether sales tax was properly collected and remitted in every state where you have nexus, along with payroll tax and worker classification. Buyers almost always require one, and having your own sell-side QoE can prevent surprises later, boost buyer confidence, and reduce time to close. Adjusted EBITDA is the single biggest hurdle in most deals, because it is the number the purchase price is built on, and every dollar a buyer disallows comes straight off your proceeds. Knowing and being able to defend that number before you go to market is essential.

Most broken deals trace back to something found after the LOI. The most common causes are diligence surprises such as earnings that do not hold up under a QoE, unrecorded tax exposure, or pending litigation, followed by financing that falls through. Working capital disputes, third-party consents on leases and key contracts, and performance slipping during a long process account for most of the rest. Clean financials, organized diligence materials, and a clear view of value keep most of these from ever surfacing.

Structure is different for each transaction because every owner has different objectives and risk tolerances. Besides cash at closing, the most common forms of consideration are rollover equity, seller financing, and earnouts. Rollover equity means you reinvest part of your proceeds into the buyer’s new combined company, keeping a minority stake and sharing in future growth and risk. Seller financing means you accept a promissory note for part of the price, paid over time by the buyer. An earnout is a portion of the price paid later, contingent on the business hitting agreed performance targets after closing, and is most common when buyer and seller cannot agree on value today.

Yes, often substantially. Whether the deal is an asset sale or a stock sale, how the purchase price is allocated across asset classes, and whether part of the price comes as an earnout, seller note, or rollover equity all change how much of your proceeds are taxed as capital gains versus ordinary income, and when that tax comes due. This is why planning ahead matters, and why we start with a conservative valuation estimate rather than a best case one. Working with your CPA and wealth advisor, you can test whether the likely after-tax proceeds actually cover your personal financial needs.

It depends on the type of company you have, the rationale for the acquisition, and what the buyer needs from the deal. In many service businesses the human capital is the asset, so the buyer has every reason to keep your people and the culture that retains them. That can look different in manufacturing or distribution, where a buyer may be after products, capacity, or territory more than the team. In strategic acquisitions, headcount reduction often shows up in the departments where the two companies overlap, usually administrative and finance roles, while customer-facing and production teams stay in place. Understanding a buyer’s motive is the best way to judge how likely your culture and employees are to stay intact, and it is one of the things we work through with you as offers come in.

We would not count on it. Selling means giving up control, and once a buyer owns the business they can rename it or fold it into their own brand. Some buyers will discuss their intentions and a few will commit to keeping the name for a period, but those promises are hard to enforce years out. We suggest your focus should be on preservation of culture, because this may have a direct impact on any deferred consideration. However, if preserving the name, brand, and legacy is a priority for you, a management buyout or a family succession is worth exploring before, and potentially alongside, running a third-party sale process.

Usually yes, but how long depends on how dependent the business is on you and any other key people who want to leave. If the relationships and know-how live with you, the buyer will want more time, so the more entrenched you are, the longer you should expect to stay. We advise planning on two to three years after a sale, then negotiating from there based on your goals.

The right fit depends mostly on deal size and complexity. Business brokers typically handle small main street businesses, M&A advisors handle middle market deals with more complex processes, and investment banks focus on larger transactions with capital markets components. If you are not sure where your business lands, we are happy to take a look and share our perspective, even if it turns out we are not the right fit.

Most M&A advisors charge a combination of a retainer and a success fee paid at closing, calculated as a percentage of the transaction value. Other advisors or brokers may only charge a success fee, a minimum fee, or a fixed fee. Fee structures vary by advisor and deal size, so it’s worth comparing terms. At Planned Exit Partners, we charge a monthly retainer plus a percentage-based success fee at closing.

Yes, plan for legal fees, accounting support, and potentially a sell-side quality of earnings report. These costs vary widely but are generally a small fraction of total transaction value and can improve the outcome. At Planned Exit Partners, we will often reduce our success fee if you elect to perform a sell-side quality of earnings report in conjunction with our sell-side process.

Businesses that engage an M&A advisor achieve valuations averaging 25% higher than those that go it alone, and represented transactions are 50% more likely to close. Roughly 99% of institutional buyers use sell-side representation on their own transactions, which tells you how much value the other side of the table places on it. An advisor brings a structured process, a network of qualified buyers, and negotiating experience that most owners don’t have from selling only one business in a lifetime. Source Benchmark International; IBBA Market Pulse Q4 2022.

Yes. Engaging a few potential buyers is a great way to learn how the market feels about your company. We like to engage with buyers who present minimal risk to your business, such as sponsors who follow the space but hold no investment in it. That feedback signals which KPIs and value drivers buyers pay a premium for and where they will press in diligence, so you can position the company for an effective exit even if you never sell.

Yes, an early conversation can identify specific steps to increase value and reduce risk well before you’re ready to sell. Many owners work with an advisor at least two to three years ahead of a sale for exactly this reason. There are also reasons to engage an advisor that have nothing to do with an imminent sale. We can give you an outside read on the value drivers and multiples in your industry, help you source or evaluate an acquisition, identify the key people the business depends on and put retention or incentive plans around them, stress test your reporting and forecasting, and work through options like a management buyout, a family transfer, or a partial recapitalization.