Mergers & Acquisitions

August 4, 2025 by Roadmap Advisors

businessman meeting with financial advisors discussing budget planning and analyzing company financial reports

When business owners consider selling their company, financial visibility becomes a priority. Clearly presented financial information has a significant influence on buyer confidence, negotiation strength, and, ultimately, the value realized in a transaction.

Even well-managed businesses can struggle to communicate their financial story effectively, leaving room for potential misunderstandings or undervaluation. Adopting financial visibility as an essential business discipline can help mitigate these risks, resulting in smoother processes and stronger outcomes.

This article outlines the role that financial visibility plays in successful business transactions.

How Accurate Financials Build Buyer Trust

Accurate financial reporting shapes the buyer’s initial perception. When economic data is clear, detailed, and consistent, it builds immediate credibility.

Buyers are cautious by nature and wary of financial statements that seem inconsistent or incomplete. When they encounter well-structured reports that align closely with operational performance, they gain confidence. Transparent financial statements allow buyers to trust what they see, enabling smoother negotiations and reducing the likelihood of late-stage concerns.

Recent industry surveys accentuate the rising importance buyers place on financial transparency. According to IMAP–Capstone’s 2025 middle-market report, acquisition strategies increasingly prioritize detailed financial visibility alongside recurring revenue.

Precise and in-depth financial reporting doesn’t just accelerate deal processes; it also leads to stronger initial offers and greater certainty around valuations.

The Importance Of GAAP & Adjusted Financials

Knowing the difference between GAAP-compliant and adjusted financials is central to deal readiness. GAAP provides a standard framework buyers expect to see, establishing common ground.

However, standard accounting methods might obscure a company’s genuine earning capacity. Seller-adjusted or normalized financials bridge this gap by clearly identifying non-recurring costs and justified add-backs.

Thoughtful adjustments help buyers appreciate the company’s underlying profitability. For instance, expenses like owner compensation above market rates, one-time legal costs, or extraordinary investments that won’t recur post-sale can skew GAAP profitability.

Documenting these adjustments clearly and logically allows sellers to present a transparent view of true earnings potential. Careful normalization enhances valuation credibility and facilitates meaningful conversations around future earnings.

Preparing For Diligence Before It Starts

Proactive organization of financial documentation well before diligence begins is essential for smooth transactions.

Sellers should prioritize assembling accurate trailing twelve-month (TTM) financial statements, customer concentration analyses, backlog visibility reports, margin breakdowns, and historical performance data. Preparation here reduces diligence friction by addressing common buyer inquiries upfront.

In-depth due diligence often involves third-party advisors, sophisticated data analytics, and heightened scrutiny around risk factors such as ESG practices and cybersecurity.

According to KPMG’s 2024 ESG Due Diligence Study, a majority of buyers now demand detailed transparency on these fronts, demonstrating the need for preparedness. Proper early preparation reduces the likelihood of issues surfacing later, lowering the risk of price adjustments or deal cancellations.

Financial Forecasts That Support a Better Outcome

Accurate, data-backed financial forecasts provide significant leverage during negotiation processes.

Buyers use projections to assess possible risk, shape deal structure, and plan post-acquisition strategy. Well-constructed forecasts provide buyers with credible scenarios about future growth, capital requirements, and cash flow generation, which directly influence valuation and deal terms.

Companies with clear forecasts, integrated from operational assumptions and historical performance trends, achieve stronger negotiating positions. Deloitte research indicates that deals supported by thorough forecasting and integrated financial dashboards meet synergy objectives significantly faster post-acquisition.

Sellers who offer thoughtful, defensible forecasts enhance buyer comfort and position themselves for better terms.

How Advisors Help Owners Translate The Numbers

An experienced advisor bridges the gap between raw accounting data and the compelling narrative that sophisticated buyers seek.

Financial advisors analyze numbers through the lens of market trends, sector standards, and what investors are looking for. They add a perspective that internal teams, even skilled finance leaders, often lack due to bandwidth constraints or limited external market insight.

Working with specialist diligence teams, covering areas like ESG, cybersecurity, tax, and HR, advisors efficiently address buyer scrutiny, maintaining deal momentum and value. When advisors frame financial visibility as a strategic asset rather than a compliance task, they help highlight the company’s strengths and broader long-term growth potential.

Owners who partner with advisors capable of framing this narrative clearly and convincingly secure buyer trust and maximize value.

Position Your Business For a Smoother, More Profitable Transaction

businessman team working at office with document on his desk

Financial visibility represents more than just clean numbers; it is the language of successful transactions. Companies that are prepared with well-structured, transparent financials gain negotiation leverage, reduce diligence friction, and secure more favorable outcomes. Even well-managed businesses benefit significantly from professional support to effectively showcase their true value.

Roadmap Advisors specializes in helping business owners tell a clear, compelling financial story that resonates with sophisticated buyers and investors. We offer detailed sell-side diligence, valuations, strategic insights, and a proactive approach designed to simplify complex transactions.

To discuss how Roadmap Advisors can position your business for a successful transaction, please visit us online and contact our experienced team directly. Centrally located in Tysons Corner, Virginia, we support clients across the U.S. with a heightened focus along the East Coast.

July 28, 2025 by Roadmap Advisors

african american woman uses computer software to manage electronic invoices

When selling a business, many owners tend to focus on factors such as valuation, the deal structure, and their potential buyers. What typically gets less attention is working capital, yet it is one of the most frequent sources of post-close surprises.

Buyers expect a certain level of working capital to come with the business, and if the numbers fall short of expectations, the final price can drop. Getting this part of the deal right means understanding how adjustments work, what buyers are looking for, and how to prepare your business to meet that expectation.

The Role Of Working Capital In The Sale Process

Working capital provides the necessary liquidity for covering daily operational costs, such as payroll, inventory restocking, and vendor payments. For buyers, it acts as the operational cushion that keeps the business functioning smoothly on day one.

It’s computed by taking current assets, including accounts receivable and inventory, and deducting short-term liabilities such as accounts payable. When buyers assess a business, they expect it to come with enough “fuel in the tank” to maintain normal operations without injecting extra capital immediately after closing.

Because of this expectation, most purchase agreements include a working capital adjustment that modifies the final sale price. Rather than relying on a static valuation number, the final amount paid is “trued up” based on how the business’s actual working capital compares to a predetermined target, often called the “peg”.

If working capital at closing exceeds the peg, sellers may receive additional proceeds; if it falls short, the buyer gets a reduction.

How Adjustments Are Structured Through The Deal Timeline

The process of working capital adjustments plays out over several defined stages throughout the transaction, each carrying its own risks and opportunities for value preservation.

Letter of Intent and Diligence: At the outset, both parties define what counts as working capital. Cash, debt, and non-operating liabilities are usually excluded. Any distinct carve-outs are discussed here to avoid confusion later.
Quality of Earnings and Peg Development: Advisors analyze historical monthly balance sheets, typically over a six to twelve-month period, to calculate a normalized average. Seasonality plays a role, so rolling averages are often more reliable than point-in-time figures.
Signing: The share purchase agreement should embed detailed definitions, including accounting policies and an illustrative schedule. It establishes a common basis for how the peg and working capital will be calculated.
Closing: Sellers provide an estimated balance sheet, and the price is adjusted based on how that estimate compares to the peg.
Post-Close True-Up: Typically occurring 60 to 90 days after closing, this step involves the buyer preparing a final working capital statement. Any discrepancy from the peg leads to a dollar-for-dollar adjustment in the final purchase price.
Dispute Period: If disagreements arise, there is often a window for negotiation, followed by review from an independent accountant whose scope is limited to pre-agreed accounting methods.

Establishing a Reliable Peg

close up businessman hand using calculator to budgeting and tax calculation monthly expenses

Getting the peg right is essential to avoid post-closing disputes; it should reflect normalized working capital under ordinary operating conditions. Sellers often make the mistake of using quarter-end figures, which can be misleading in seasonal industries. A rolling monthly average smooths out fluctuations and gives a more accurate picture.

Accounting consistency matters, meaning that the historical data used to set the peg should follow the same policies and conventions as the final closing statement. Differences between GAAP and non-GAAP practices often trigger disputes, especially when assumptions about revenue recognition, reserves, or accruals are not aligned.

The quality of inputs is another factor, so aging receivables, slow-moving inventory, and non-recurring accruals should be adjusted before finalizing the peg. Including outdated or inflated items increases the risk that the working capital figure will be challenged.

Some deals introduce collars around the peg, allowing for small fluctuations without triggering an adjustment. For example, a peg might include a 2% plus-or-minus band to reduce disputes over minor differences.

Deal Terms That Affect The Final Payout

The way a working capital adjustment impacts the final purchase price depends heavily on the structure and language of the agreement, with several common approaches seen across transactions:

Dollar-for-Dollar Adjustments: Most US deals adjust the purchase price in full for every dollar above or below the peg.
Scaled Adjustments: Some agreements soften the impact by applying a partial adjustment, such as 50 cents for every dollar over or under.
Single vs. Two-Way Adjustments: A one-way adjustment only protects the buyer if working capital is low. A two-way structure adjusts in favor of whichever party is affected.
Escrow or Set-Off: Buyers often recover downward adjustments from funds held in escrow, which are typically funded by the seller at closing.
Dispute Clauses: The scope of any accounting arbitrator should be limited to applying the agreed-upon methods. Introducing new policies during a dispute can lead to unfair outcomes and extended litigation.

Alternatives To The Traditional Adjustment Model

Some sellers use a locked-box structure instead of a post-closing adjustment. While more common in European transactions, the locked-box model is gaining traction in U.S. middle-market and private equity deals. There is no true-up after closing.

Buyers accept the risk of working capital changes, provided there are protections like leakage covenants and warranties. While this approach offers more price certainty, it demands a higher level of trust and diligence upfront.

Protecting Deal Value

interest rates and dividends, investment returns, income, retirement Compensation fund

Working capital adjustments often sit in the background of M&A discussions, but they can have a real effect on the final price. Sellers who approach the peg with data, discipline, and aligned accounting practices are more likely to avoid any costly surprises.

If you’re thinking about a potential sale and want to avoid the post-close surprises that working capital disputes can trigger, connect with the experienced team at Roadmap Advisors.

July 21, 2025 by Roadmap Advisors

Let me describe two actual former clients at polar opposite sides of one spectrum:

Client A runs a professional services firm (in addition to a few side projects), and has several entities that share a common cost center. Because of this added level of complexity, he consolidates financials in an Excel spreadsheet. Not ideal, but not a deal breaker. Because of his background with accounting, he feels confident dAvoid costly surprises in due diligence when selling your business. Learn how financial readiness, clean data, and a strong narrative can secure higher valuations and smoother transactions doing the numbers “the manual way”. Client A hires Roadmap Advisors to sell his proserv business. We are provided with monthly financials going back 5 full years, in Excel. We instantly notice that the P&L and balance sheet are formatted differently than what we’re used to seeing from Quickbooks or Netsuite. We see some hard coded formulas that don’t make a ton of sense. Client A insists that these are the right numbers, and we don’t need to see the P&Ls of his side projects or the shared cost center to sell the main business. We move on.

Client B runs an online subscription service. When asked for financials, we’re given an accountants’ copy of their full Quickbooks file, along with a “raw data” run from the website plugin that manages the subscriptions. We have every single transaction, and the CFO apologized that they have not yet completed their migration to a SaaS “data lake” tool, but provided a mockup of the KPI dashboard that is forthcoming.

businessman analyzing business Enterprise data management, busin

I’m sure once framed this way, you can guess what happened. Client A’s deal blew up in diligence. There was an Excel error that threw off all financials for all years historically, and they overstated margins by a very significant amount. Once it was found, the buyer walked. Client B sold to a top tier PE firm for nine figures, after gliding through due diligence done by a top 10 accounting firm.

You’ve worked hard to build your business. Don’t be Client A. Don’t let avoidable issues in due diligence cost you. When it’s time to sell, every number will be scrutinized. A surprise in the quality of earnings (QoE) review, no matter how small, can create doubt, slow the process, or reduce your valuation. By getting ahead of potential red flags and ensuring your financials are buyer-ready, you protect the value you’ve spent years creating. Partnering with an investment bank early in the process helps ensure you present your business with clean numbers, clear narratives, and no surprises.

Switch to Accrual Accounting

Most small businesses operate on a cash basis, but buyers and quality of earnings (QoE) providers expect financials to reflect accrual accounting. Accrual accounting offers a more accurate picture of financial performance by aligning revenue and expenses with the periods in which they are earned or incurred—not when cash changes hands. This matters because timing differences under cash accounting can obscure true profitability, overstate margins, or misrepresent working capital needs. Switching to accrual accounting ensures your numbers tell the full story, meet GAAP standards, and hold up to buyer scrutiny.

Own the Financial Narrative

Buyers want more than a spreadsheet. They want to understand the business behind the numbers. Start by establishing a clear narrative that explains what’s driving key financial outcomes. If margins have improved, can you articulate why? If churn is low, what’s the strategy behind retention? When founders and CFOs speak to numbers with fluency and clarity, buyers gain confidence not only in past performance but also in future scalability.

Pressure-Test Your Assumptions

Before sharing budgets or financial projections, take the buyer’s perspective. Which assumptions will they challenge? Should the one-time expenses you identified and used to adjust EBITDA really one-time? Are customer cohorts segmented in a way that reveals trends rather than obscures them? Roadmap’s pre-diligence process includes a full review of historical adjustments, EBITDA assumptions, and working capital to ensure sellers are fully prepared and positioned to withstand scrutiny.

finance manager calculated capital prepare plan and budget for financial management of organisation .

Let the Data Room Speak for You

The sellers that are generally most prepared for a transaction are ones that plan for the sale years in advance, which includes organizing internal documents in the way most data rooms are. An organized data room does more than neatly store documents. It guides the buyer’s understanding of the business and shows the company operates with discipline, all while reducing the need for additional diligence questions.

Key elements of a strong data room include:

KPI dashboards that link operational drivers to financial outcomes
Clean, labeled folders with intuitive structure and consistent naming conventions
Summaries and reconciliations that bridge internal reporting to official financials
Supporting contracts and schedules for revenue, costs, and key metrics
Version control to ensure accuracy and prevent duplication or confusion

By making analysis seamless, you reduce friction, increase engagement, and shorten deal timelines while projecting operational discipline and readiness.

Financial Confidence Drives Value

Buyers notice when sellers are in command of their numbers. The more clarity, consistency, and accuracy your team brings to diligence, the more credible your valuation becomes. Disorganization or inaccurate explanations, on the other hand, erode trust and lead to decreased valuations or the buyers terminating the transaction.

Work with Roadmap Advisors for more information.

July 18, 2025 by Roadmap Advisors

Office building with a large room full of tables and people working and part of the staff walking between the tables. Blurred people long exposure

A Confidential Information Memorandum (CIM) is the primary marketing document in any sell-side M&A process. Its role is to provide buyers with a comprehensive view of the business while positioning it as a compelling investment opportunity. When running a sell-side process, we often hear from buyers something along the lines of “We had lots of questions, but as we read through the CIM, our questions kept getting answered. Its like you anticipated what we wanted to ask.”

An experienced investment banker, through the ups and downs of many completed deals, should be able to identify which issues are most important to potential buyers. This information is not the same across industries, business sizes, or situations. Regardless, a strong CIM makes the sale process go more smoothly by establishing credibility early on, short-cutting a lot of 1-to-1 question and answer sessions, and setting the tone for an efficient due diligence period.

Below are some of the sections we typically include in a sell-side CIM.

Executive Summary

This section summarizes the business for an executive that isn’t willing to invest the time to read a 50+ page document. If you only had 5 slides to showcase you “elevator pitch,” what would it be? At the very least, it should provide a very clear description of business model and go-to-market, the financial picture of the company, the type of transaction sought, and provide a “pitch” for why one might be interested.

technical financial graph on technology abstract background

Business Overview

This section lays out the business in greater detail. What are the products or services offered? Who is on the management team? What types of customers or clients do you serve? How are products/services marketed, delivered, charged for, etc.? How does the business compare to competition? Without giving away your “secret sauce”, you should give buyers a very clear understanding of how your business works.

Growth Opportunities

The growth section is a critical aspect of every Roadmap Advisors CIM. Whether or not our clients come to us with a fully vetted “growth plan,” we typically sit down with management for hours to brainstorm the best ways a new owner might grow the business. These are strategies specific to your business. Sometimes geographic expansion makes the most sense.. and sometimes its irrelevant. Perhaps it involves landing more channel partners or retailers, launching new product lines, optimizing pricing, leveraging new technology, or investing in high ROI marketing. There is no right answer, but buyers do appreciate a concrete plan that helps them underwrite your growth story.

Market Overview

The market section is primarily intended for private equity buyers or strategics from a tangential industry. It describes the macro dynamics in the industry, the growth, market size, trends, competitors, and regulatory dynamics. Buyers already in the industry tend to ignore this section, but nevertheless, it helps paint the broader picture of how the company operates.

Financials

A robust financial section should show historical financials, KPIs, and forward projections. P&Ls and balance sheets should be cleanly laid out. Revenue breakdowns, margin profiles, and EBITDA adjustments should be included so that buyers can have a solid understanding of the financials after a quick read through the section. For buyers that engage at IOI stage, we often also provide a “datapack” in Excel format, so that all financial details can be easily inserted in buyers’ models.

The CIM is the central document of a sell-side process. It can elevate a business, even in the eyes of sophisticated buyers. A strong CIM creates created efficiency in a process, which ultimately reduces seller distraction and drives better outcomes.

Connect with Roadmap Advisors Today

At Roadmap Advisors, we understand that a well-crafted CIM is more than just a marketing document—it’s a strategic tool that sets the tone for the entire sale process. If you’re considering a sale, let us help you put your best foot forward. Partner with Roadmap Advisors to craft a CIM that drives engagement, builds buyer confidence, and leads to stronger outcomes.

July 8, 2025 by Roadmap Advisors

July 3, 2025 by Roadmap Advisors

Sell-Side M&A Advisor Speaking To Board About Their Business Exit Options

Making the hard decision to exit a business is one of the most consequential moves an owner can make. In 2025, shifting market dynamics, tighter capital conditions, and a recalibrated private equity environment are reshaping how and when owners can step away.

Factors such as fewer IPOs, increased private deal activity, and new tax considerations have made the exit conversation more relevant than ever.

Having a firm understanding of the range of available paths out there, each with its own tradeoffs in timing, valuation, tax impact, and complexity, can help business owners prepare with clarity and confidence.

Common Exit Routes & What To Expect

Each exit path has different expectations around timing, valuation, deal complexity, and tax implications. Owners must weigh these differences carefully when mapping their next steps.

Strategic Sales

Strategic sales often appeal to sellers aiming for a full cash-out and maximum valuation. These deals involve competitors or industry consolidators and usually deliver 100% of proceeds at closing, sometimes with an earn-out based on future performance. Sellers should prepare for a detailed due diligence process and possible cultural alignment issues. In 2023, in the lower-middle market, strategic buyers paid an average of 6.8× EBITDA.

Private Equity

Business Owner Signing A Letter Of Intent

Private equity offers another avenue, ranging from full buyouts to minority recapitalizations or rollovers into continuation funds.

These deals tend to close faster than IPOs and often allow owners to keep a stake, offering upside in a future sale.

Sellers typically go through several weeks of financial diligence before signing a letter of intent, and valuations vary, usually falling between 6× and 10× EBITDA depending on the company profile.

Initial Public Offerings (IPOs)

Initial Public Offerings remain a high-profile option but are rarely practical for smaller companies. They require significant preparation, including SEC compliance and underwriter involvement, and liquidity is staged over time. Costs can be steep, and current market conditions make this route less attractive than in prior years.

Management Buyouts

Management buyouts place the business in the hands of the existing leadership team, which often combines senior debt, seller financing, and rollover equity. While appealing from a continuity standpoint, they can be difficult to fund unless managers have access to significant capital. The resulting debt load can also weigh on future operations.

Employee Ownership Models

Employee ownership models, such as ESOPs in the US and EOTs in the UK, create a gradual transition while offering tax advantages. In the US, owners who sell at least 30% of their C-corp to an ESOP may defer capital gains taxes under IRC §1042.

Family Succession

Family succession involves passing ownership to the next generation.

Valuation may be discounted to reflect financing limitations and estate planning goals.

This route takes time and requires early involvement of heirs in management.

Proper planning using gift exemptions, which stand at $13.61 million in 2025, can reduce long-term tax exposure.

Liquidation & Bankruptcy

Liquidation and bankruptcy represent last-resort options to consider. Liquidation often brings lower returns, particularly for service businesses, and may yield less than the company’s net working capital. Bankruptcy filings, whether through Chapter 11 restructuring or Chapter 7 liquidation, involve court oversight and leave owners with limited control over outcomes.

Tax & Financing Considerations

Taxes remain one of the most impactful variables in any exit. Long-term capital gains rates top out at 20% federally in 2025, with an additional 3.8% net investment income tax.

Sellers of Qualified Small Business Stock (QSBS) may benefit from exclusions under Section 1202, potentially shielding up to 100% of gains if holding requirements are met.

Financing tools can shape the structure of a transaction. SBA 7(a) loans, popular in management buyouts and partner exits, remain a preferred funding source, although lender fees were reinstated in March of 2025. Limits currently cap at $5 million, making them especially relevant for lower-middle-market transactions.

Some states apply franchise or gross-receipts taxes post-sale, which can impact an organization’s net proceeds. Early review of both federal and state-level obligations is necessary for accurate net-valuation modeling.

Steps To Prepare For a Future Exit

Sell-Side Mergers & Acquisitions Advisor Consulting Business Owner On Their Future Exit

Effective preparation improves deal outcomes and gives owners more leverage during negotiations. The process starts with identifying personal goals, such as income needs, legacy ambitions, or employee transition preferences.

Getting a valuation early helps set expectations and highlight any value gaps. Despite this, only 15% of owners seek a formal appraisal prior to launching a sale process. Engaging the right advisory team, including an M&A attorney, tax professional, and financial planner, adds significant value.

Financial statements should be cleaned up, with audited or reviewed financials strongly preferred by private equity and IPO buyers. Once a buyer is identified, a signed letter of intent locks in headline terms while allowing for final diligence and contract negotiation.

After closing, attention should shift toward post-sale planning. That may include wealth preservation, reinvestment of proceeds, estate planning, and managing any earn-out periods still in effect.

Owners who take the time to prepare early and understand their options often enter the process with more confidence and end it with better results.

Making The Right Move At The Right Time

Choosing how to exit a business isn’t about finding the one perfect answer; it’s about understanding the full range of possibilities and aligning them with personal goals, company dynamics, and market realities.

If you’re currently considering a sale, recapitalization, or succession plan, Roadmap Advisors brings deep experience in valuations, buyer outreach, due diligence, and strategic transaction execution.

Our team works with owners across the lower-middle market to drive successful outcomes in even the most complex transitions. To begin a confidential conversation, reach out to our team by scheduling a consultation online.