Having worked on hundreds of mergers and acquisitions representing buyers, I’ve noticed several consistent patterns in their priorities. Most buyers require financing to close deals, and the banking partner’s experience plays a crucial role in transaction execution. The following expectations are nearly universal:
1. Cash Flow
The most critical factor is a business that generates positive cash flow, priced within industry-standard multiples (typically 2 to 4x EBITDA or SDE).
2. Trends
Buyers favor growing revenues and cash flow, with particular emphasis on the past two years.
3. Time in Business
Established companies are seen as lower risk due to strong customer relationships and employee loyalty.
4. Operational Independence
Businesses should not be overly reliant on the seller’s daily involvement. Employee cross-training and transition planning are essential for smooth ownership transfer.
Recommendations for Sellers
To maximize buyer interest and facilitate a successful transaction, sellers should:
- Prepare Financials – Ensure clean, well-organized financial records with clear documentation of revenue, expenses, and profitability trends.
- Enhance Scalability – Strengthen operational processes and reduce reliance on the owner through delegation, staff development, and standardized procedures.
- Show Growth Potential – Invest in strategic improvements that demonstrate future revenue opportunities and market positioning.
- Engage an Experienced Business Broker – Professional guidance can streamline negotiations and improve deal structure, increasing the chances of a successful close.
Seller preparation is integral, and addressing these key areas will help attract the right buyers and optimize transaction outcomes.
