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Business Owners

12 Things Not to Do In M&A: A Business Owner’s Guide on How to Approach the M&A Process

Click here to subscribe to Exit Ready – the Axial newsletter that distills the best content, tips, and guides designed to educate exit-minded business owners running $5-$100M businesses.

For most business owners, exiting their business is a once-in-a-lifetime event. It’s also an inherently complex process. Though every transaction is different, there are several common mistakes that owners can, and certainly should, avoid. 

We compiled advice from investment bankers, investors, and business owners who have navigated through various transactions. 

Below are 12 key tips on what not to do during an M&A process. To dive deeper into each section, you can download the eBook by entering your email below.

12 Things Not to Do in M&A | eBook



1. Don’t overlook exit planning

Preparing for a succession event significantly influences the financial success of the transaction. Despite the evident need for a succession plan, many fail to create one.

First, there is often a perceived urgency of day-to-day operational demands over “long-term” planning. Second, more often than not, leadership hasn’t been through a succession event and lacks the knowledge and experience of how crucial developing a plan can be. 

Not all succession plans are equal; a well-developed one can ensure success, while a poorly designed plan can lead to failure. An effective plan should consider the interplay among business, ownership, and family, aligning with goals and addressing contingencies, gaps, and opportunities.

2. Don’t underestimate the importance of the right advisor

3 REASONS YOU NEED AN ADVISOR

  1. Help position the company and maximize valuation
  2. Get negotiation advice from experts
  3. Increase the likelihood your transaction will close

Explore Axial’s Advisor Finder Program

The Advisor Finder program guides business owners through the M&A Advisor identification, interview, and hiring process. Leveraging 10 years of behavioral data and relationships on the Axial platform, we help you choose the right advisor for your business. Get started here.

3. Don’t neglect your employees

When it comes to maximizing valuation before a transaction, there are countless strategies that business owners can implement. One of these strategic discussions is employee engagement.

Company culture is key.

Be sure people are connected to the mission and vision of the company and understand why their contributions are valuable and how they help drive the business forward. Not only will this help with retention, morale, and overall culture, but it will ultimately maximize your business’s value.

4. Don’t fail to diversify your personal assets outside of your business

3 WAYS TO REDUCE YOUR DEPENDENCE ON YOUR BUSINESS 

  1. Take stock of your financial situation, including the assets saved outside the business and your annual budget.
  2. Calculate your wealth gap, the difference between what you currently have saved outside the business and how much you need outside the company to generate your desired long-term income. 
  3. Look at ways to diversify your investments and supplement your income with non-business assets.

5. Don’t forget to get your financial house in order

Getting your financial house in order is crucial to positioning the company well in the market, improving the company’s valuation, and running a smooth deal process.

3 THINGS TO KEEP IN MIND

  1. Understand and optimize for the company’s key value drivers. Before actively starting an exit process, consider how buyers might evaluate your company and fine-tune your focus accordingly.
  2. Reduce financial risk. Buyers want to be confident in the continued financial success of your business before doing a deal. It takes time to correct any vulnerabilities, so it’s important to start thinking about potential risks early.
  3. Prepare for due diligence. A fast, smooth deal process increases the odds of a successful outcome. Be ready for due diligence, which means organizing your financials as much as your legal documents.

6. Don’t go overboard on EBITDA adjustments.

Gaps in valuation expectations are an extremely common roadblock for M&A transactions. One way to avoid disputes in purchase price is for sellers to double and triple-check that all adjustments to restated EBITDA are appropriate and supported through proper documentation.

Conducting sell-side due diligence – which usually covers financial statements, taxation, information systems, and operations – is another way to ensure that EBITDA add-backs are appropriate. 

To dive deeper into sell-side due diligence, check out the two resources below.

Sell-Side Quality of Earnings & The Benefits For Business Owners

Due Diligence and the Art of Preventing the Broken LOI

7. Don’t let preconceived notions rule your deal process

One commonality many business owners share is their preconceived notions surrounding the “right” buyer for their business.

Statements like the ones above can be relatively common and are all extreme generalizations. While a strategic buyer may be great for one business, an independent sponsor with niche operational expertise may be right for another. And while family offices can be fantastic partners, so can private equity firms. 

It’s best to keep an open mind regarding contract terms, deal tactics, or anything else.

8. Don’t neglect to disclose important elements of your history

In today’s market, diligence processes are more comprehensive than ever, and if a good buyer is on the other end of the deal, nothing will go unearthed. It’s not enough to disclose what is essential, but to take stock of everything and anything that could accidentally be omitted. 

Disclose everything. And then go back and double-check.

9. Don’t overlook chemistry

Every business owner wants the perfect fit when it comes to finding a buyer or growth partner. While financial considerations are important, the chemistry between the founder and buyer may be the most crucial indicator of a successful partnership.

The company and future partner must understand how each other functions and how to complement one another. Compatibility can be elusive and hard to quantify, so getting face-to-face time in today’s digital age remains so important.

10. Don’t neglect terms and obsess over price

It’s not worth it to maximize valuation at the expense of terms. Here are a few areas to focus on when evaluating the terms of a potential deal:

  • Consideration: This refers to how the owner and other shareholders will get paid, i.e., cash vs. stock. 
  • Stock Protections: Considering a collar agreement on received stock is a good way to protect from movement while the transaction closes.
  • Earnouts: Earnouts are a common way to bridge the gap between a seller’s expectation of value and a buyer’s willingness to pay.

11. Don’t fail to do your own diligence

Earnouts, for example, are often a great solution to bridge valuation gaps and bring the buyer and seller to a middle ground. Good earnouts incentivize the people running the business to bring it to the next level. However, earnouts are not guaranteed, and sellers who take an earnout should be sure they understand exactly what it entails.

Be open to terms, but fully understand them before committing.

12. Don’t underestimate the complexity of integration

Integration can be the most difficult part of an inherently challenging process. Even when changes are for the better, they still need to be anticipated.

To ease the integration pains, focus on communication and transparency to ensure everyone is aligned on dates, timelines, and responsibilities. Not only will this help maintain a smooth transition, but it will quell uncertainties for the employees and make everyone more comfortable with the new chapter ahead.


To download the 12 Things Not To Do In M&A eBook, please enter your email below.

Additional Resources For Business Owners


NOTE: This information does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.

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