DAI Magister emphasises the importance of early and strategic preparation before entering a competitive M&A sale process. Their Stage 2 exit strategy advocates for businesses to invest time in exit readiness over several months or even up to two years before formally putting the company on the market. This approach can significantly increase both the value and certainty of the deal.

Exit Preparation as a Business Process

Victor explains, “Exit preparation should be treated as a structured business process. Just as any company runs on efficient processes that support growth, exit preparation needs clear oversight, defined goals, and measurable outcomes, managed by a dedicated team.” For CEOs, preparing for an exit should be a core responsibility, requiring dedicated focus well before the company is officially put up for sale.

He adds, “CEOs often fail to invest time in exit planning because they are unsure where to focus their efforts. Most successful growth CEOs may only oversee a handful of exits in their careers. Bringing someone experienced into the CEO’s circle early can provide invaluable guidance and confidence during the process.”

Focus Beyond the Numbers

Victor highlights a common mistake: CEOs often emphasize refining financial forecasts as they would for a funding round. However, strategic buyers are less interested in current numbers and more focused on what they can achieve post-acquisition. “A company that projects $50m in revenue but achieves $45m could receive a lower valuation than if it had forecasted $42m and achieved $43m,” he explains. “Exceeding near-term forecasts, even slightly, builds buyer confidence and can enhance the exit price.”

Buyers prioritise risk reduction, and a business that demonstrates consistent performance will be viewed as both an exciting and safe acquisition. This risk management is crucial as buyers are equally concerned with the downside as they are with potential upside.

Crafting a Compelling Equity Story

Victor stresses the need for sale memorandums to tell a compelling story that highlights achievements that resonate with large buyers. These can include overcoming significant challenges like redeveloping a complex tech stack, breaking into tough markets, securing game-changing deals, or maintaining high customer satisfaction. “An equity story should articulate how the company can grow and expand its offerings post-acquisition, filling strategic gaps for the buyer or enabling them to win new contracts,” Victor says. “The narrative must emphasize the company’s core DNA and what makes it uniquely valuable.”

Large buyers are drawn to acquisitions that can drive significant revenue and value post-deal. Therefore, highlighting key attributes that differentiate the company and showcasing how the business aligns with a buyer’s strategic goals is essential.

Navigating KPIs and Competitive Positioning

Victor advises caution when presenting KPIs and unit economics, as metrics are often interpreted differently by large companies, and over-sharing can lead to unwanted scrutiny. Instead, focus on defining the 2-3 most compelling competitive differences that make the company stand out. “Many CEOs focus heavily on generating excitement around their businesses, but it’s equally important to emphasise stability and reliability, especially for large buyers,” Victor notes.

The Importance of Early Preparation

Victor concludes by emphasising that thorough preparation is key to successful exits. He notes that many sales processes fail because companies are treated merely as assets for sale, giving buyers limited time to make informed decisions. By establishing dedicated exit preparation teams and setting a clear strategy, CEOs can ensure they are well-positioned for success.

“CEOs must invest time in exit readiness, conducting regular reviews and aligning management and the board on progress every few weeks,” Victor advises. “Sale memorandums should captivate buyers, clearly communicating how the company stands out, its unique opportunities, and its differentiated value proposition.”

Successful M&A exits require more than just compiling data; they demand strategic foresight, compelling storytelling, and a proactive approach to managing risk and expectations.