How to Avoid the Deal Killers During Financial Due Diligence

About the Episode

This episode is your essential guide to surviving financial due diligence, the number one hurdle in selling your business. Learn how to prepare your company’s books before you go to market, ensuring buyers see a clean, consistent EBITDA that justifies your asking price. Stop leaving millions on the table—discover the expert moves that speed up the process and guarantee a successful M&A exit.

Get experts and get your experts involved early. And you’re going to hear some things that you probably may not want to hear, but it’s better to hear them early than later.

Rosco Graves

What You’ll Learn

• Preparation is the Ultimate Defense Against a Price Cut: The biggest mistake sellers make is not being prepared, leading to delays and lower offers. Hire experts early to perform pre-sale financial diligence to uncover and fix issues, preventing the buyer from dramatically changing the business valuation with a surprise re-trade.
• Clean Your Financials to Maximize Your EBITDA: Buyers use a process called Quality of Earnings (QoE) to strip out noise and determine your company’s true run-rate profitability. You must proactively adjust for one-time events and remove all owner compensation and non-essential expenses to present the highest possible, defensible EBITDA figure.
• Understand How Buyer Type Changes the Scrutiny Level: Financial buyers, like private equity firms, focus intensely on the financial return on investment and perform heavy financial diligence. Understanding whether you are dealing with a strategic buyer or a financial buyer lets you anticipate their focus and prepare the appropriate level of documentation and deep data analysis.
• A CPA Audit is Not the Same as a Quality of Earnings Review: Do not rely on your regular tax preparer; an audit only confirms your financials meet accounting rules, but a QoE review focuses on the consistency and predictive quality of your earnings. Missing this step leaves your company vulnerable to significant purchase price adjustments when the buyer’s team performs their own deep financial review.
• Fix Your Systems to Prevent Deal-Killing Bottlenecks: Poor financial systems that cannot easily provide detailed, historical reports will stall the sale and cost you the buyer’s attention, making financial diligence the biggest deal bottleneck. Investing in clean, reliable accounting systems three to five years before selling ensures you can quickly provide three to five years of requested financial detail.

Topics Covered

Want More? Related Resources:

• Most Common Deal Killers When Selling Your Business
• Preparing Financial Statements When Selling a Business
• M&A Due Diligence Preparation

Meet Our Guest

Rosco Graves

Managing Director at Polaxis | Dallas, Texas

Rosco Polaxis has more than 20 years of experience in leading strategic planning, M&A, operational finance, and internal controls at industry-leading companies. He uses his knowledge to partner with small and medium-sized organizations to maximize growth opportunities and increase value.

LinkedIn: https://www.linkedin.com/in/roscograves/