M&A Is Picking Up: How to Prepare Your Business to Transact

Corporate dealmaking is accelerating, and most business owners aren't ready for it. CFO Dive recently reported that EY's mid-year outlook projects U.S. M&A deal volume to rise 8% in 2025, driven primarily by corporate strategic buyers as private equity activity levels off. That shift matters — corporate buyers move faster, underwrite differently, and expect cleaner books than most PE-backed acquirers.

If you're running a $5M to $75M business and a sale, acquisition, or recapitalization is anywhere on your three-year horizon, the time to prepare is now. Not six months before you go to market. Now. At Pyek Financial, we work with lower-middle-market companies through both sides of transactions, and the single most consistent pattern we see is sellers who are technically ready to sell but operationally unprepared to close.

The gap between "interested in selling" and "ready for due diligence" is where deals die. This article is about closing that gap before it costs you.

What Corporate Buyers Expect That Most Sellers Don't Anticipate

Strategic acquirers — companies buying for market expansion, capability, or customer base — are not running the same playbook as a financial sponsor. They're not primarily focused on EBITDA multiples. They're looking at integration risk, customer concentration, revenue quality, and whether your financial infrastructure can plug into theirs cleanly.

Clean books and clean revenue don't happen in the weeks before a transaction. They're the result of months of intentional financial infrastructure work. The earlier you start, the more options you have.

Why Your Financial Statements Are the First Thing a Buyer Scrutinizes

Buyers aren't taking your word for anything. Every number in your CIM (confidential information memorandum) will be tested against your actual financials, and those financials will be tested against your bank statements, tax returns, and contracts.

Accrual-basis accounting is table stakes for any serious transaction process. If your books are on a cash basis — which is common for smaller businesses — that's correctable, but it takes time. Your accountant or bookkeeper can't flip that switch in a weekend. Converting from cash to accrual requires reclassifying transactions, establishing proper revenue recognition, and rebuilding your balance sheet in a way that accurately reflects assets, liabilities, and working capital.

Working capital is a term buyers use to mean the amount of liquid assets needed to run the business day-to-day (current assets minus current liabilities, roughly). It's also a common deal lever. If your working capital calculation is sloppy, buyers will set the peg — the baseline working capital expectation in the purchase agreement — in their favor. A $500K swing in working capital peg is not unusual on a $10M deal, and most sellers only discover this issue at the LOI stage. By then, negotiating leverage is limited.

How to Identify and Fix the Four Problems That Kill Deals

These aren't hypothetical risks. They're the four issues we see most often across transaction support engagements at Pyek Financial.

1. Customer concentration
No single customer should exceed 15–20% of revenue if you want maximum deal value. Above that threshold, buyers discount either the multiple or the purchase price, or they structure earnouts that put your money at risk. Reducing concentration takes time — ideally 12–24 months of active effort before going to market.

2. Owner dependency
If the business can't operate for two weeks without you making a decision, buyers will price that risk. The fix is documented processes, a capable management layer, and evidence — not just assertions — that the business has operational depth.

3. Inconsistent or undefended EBITDA
EBITDA (earnings before interest, taxes, depreciation, and amortization) is the primary valuation metric in most middle-market deals. But raw EBITDA is not what buyers pay on — they pay on adjusted EBITDA, which adds back legitimate one-time or owner-specific expenses. Those addbacks need to be documented, defensible, and consistent. "Trust me, that's a one-time expense" is not a position that survives diligence.

4. Deferred accounting cleanup
Reconciliation issues, misclassified expenses, missing depreciation schedules, and unapplied cash receipts are all common in businesses that haven't had dedicated financial oversight. Every one of them is a diligence flag. Buyers don't know which ones are innocent and which ones represent deeper problems, so they treat all of them as problems.

When Should You Start Preparing for a Transaction?

Two years is the honest answer. Eighteen months is the minimum if the business has material cleanup work. Twelve months is the floor, and only if the financial infrastructure is already solid.

That timeline isn't arbitrary. Lenders and buyers want to see financial performance across two to three full years. If you start cleaning up your books six months before going to market, buyers see a sudden improvement in financial discipline that looks cosmetic — because it is. Two years of clean financials tells a story. Eight months of clean financials looks like preparation for a sale, which raises questions rather than answering them.

The right sequence is: clean the books, build the management team, address customer concentration, document operations, then go to market. Not the other way around.

Buy-Side Preparation: What Acquirers Need to Get Right Too

The 8% volume increase EY is projecting isn't just seller activity. Corporate strategic buyers are going to be more active this year, and that means middle-market companies doing acquisitions need to tighten their own processes.

Buy-side diligence is where acquirers make or lose money. Overpaying because you didn't stress-test the seller's EBITDA addbacks, or closing without a clear integration plan for accounting systems and reporting, creates problems that outlast the deal itself. We've seen acquirers inherit a seller's cash-basis books and spend six months trying to understand what they actually bought.

If you're on the buy side, the questions worth asking before you sign an LOI include: What does their revenue recognition policy look like? Are their contracts assignable? What's the real working capital run rate, not the one they've projected? A qualified transaction support advisor asks these questions before the purchase agreement is drafted, not after.

The Window Is Open — Use It

An 8% increase in deal volume means more buyers, more competition for quality assets, and less patience for sellers who show up unprepared. That's not a threat — it's an opportunity if you're ready.

The businesses that transact well are the ones that treated preparation as a process, not a scramble. If a transaction is anywhere on your horizon, start that conversation now — before the pressure of a live process forces you into decisions you'd rather not make.