Whether buying or selling a company, M&A is a game of preparation and emotional discipline. The owners who win are those who game plan, surround themselves with specialists, protect their core business operations and prioritize the structural reality of the deal over the headline number.
“Buyers must establish hard boundary lines before a process begins and be fully prepared to walk away if those boundaries are crossed,” says Robert W. Evans, Principal at Brady Ware.
Smart Business spoke with Evans about the hidden realities of an M&A deal and how both sellers and buyers can insulate themselves from the worst outcomes.
What common mistake do you see from business owners that could affect their deal value?
Business owners should not run the transaction and run their company at the same time. It’s a very chaotic process to buy or sell a business. An M&A transaction is essentially a grueling, full-time second job. When owners try to manage or guide the process or, worse, micromanage their outside consultant team while simultaneously trying to manage daily operations, predictable problems happen: business performance dips, issues arise within the business, and/or the process of buying or selling becomes more arduous. Business owners need to keep their eye on their company. Any business interruptions or issues during the M&A process can become negatives that give the other side momentum in the bargaining process.
Additionally, deal fatigue is real. After months of legal fees and meetings, it is easy to concede on major terms just to cross the finish line. However, that could be a serious mistake.
What should sellers keep in mind to maximize a deal?
Build your deal team early and focus on net proceeds. Selling a business is an emotional, high-stakes milestone. Sellers need to move from an operational mindset to a transactional one long before going to market.
Also, spend your energy normalizing the company’s financials. Sellers need to clean up the books, identify legitimate ‘add-backs’ (owner’s salary, personal vehicles, one-time lawsuits), and get a clear picture of normalized EBITDA.
On the buy side, what helps to ensure the transaction meets expectations?
Buyers should fall in love with the data, not the deal. Buying a business is an excellent acceleration strategy, but deal momentum can easily blind an eager buyer to hidden structural flaws. The purchase price is just the entry fee. It cannot be overemphasized that true success depends on cultural and operational fit. Buyers must evaluate whether the target’s corporate culture aligns with theirs, how they will retain key talent and whether the technology stacks can actually talk to each other. Never rely solely on the seller’s pitch deck. Buyers need an independent team to stress-test client or customer concentrations, critical employee relationships, audit and analyze working capital requirements, legal, competitiveness, environmental, and potential tax liabilities.
What misconceptions tend to have the most impact on deals?
The biggest misconception about M&A is when it actually starts. Often, the strategic planning phase errantly starts when a deal presents itself or through some other instigator. Before you look at a single company, you have to look in the mirror and ask, ‘Why are we even doing this? Are we trying to buy market share? Are we looking to expand into a new region, grab a specific piece of tech, or just find cost efficiencies through economies of scale?’ If you aren’t crystal clear on that ‘why,’ you’re going to waste a ton of time. It’s only after the strategic goals are locked down that you then flip to target identification. That’s when you go to market to find your core team that also fit your criteria.
People always underestimate this initial phase because it feels like prep work. But if you get this wrong, your entire trajectory is off. It really sets the stage for everything that follows. ●
INSIGHTS Accounting is brought to you by Brady Ware.
