What founders are really asking about M&A and Exit Readiness

Earlier this year, YFM’s Investment Director Sophie Tainton joined a webinar bringing together founders, investors and advisers to talk through M&A and exit readiness. Attendees submitted questions in advance and it’s those questions, as much as anything said on the day, that told a clear story about where founders’ heads actually are when they start thinking seriously about acquisitions and exit readiness.

A few themes came up repeatedly. They’re worth exploring, because they reflect the things that tend to determine whether a deal goes well or doesn’t.

Questions about valuation methodology came up more than once, and the underlying anxiety is understandable. Founders who’ve spent years building something want to know it will be valued fairly and they’re often uncertain about what “fairly” actually means in practice.

The honest answer is that valuation in the lower mid-market is less formulaic than people expect. Multiples matter, but what sits underneath them matters more. Buyers, whether trade or PE-backed, are buying future cash flows, and the question they’re really asking is: how confident can I be that these numbers hold up? Revenue that’s contracted, recurring, and spread across a broad customer base will always be valued more highly than revenue that’s concentrated, project-based, or dependent on relationships that walk out the door with the founder.

Value proven is worth considerably more than value projected. If you’re thinking about exit, the work you do now to demonstrate that your performance is repeatable, not just that it happened, is the work that moves the needle on price.

Several attendees asked about deal mechanics, earn-outs, staged equity, how minority shareholders are protected when a majority stake changes hands. These are legitimate concerns, and they’re worth understanding early.

Earn-outs are one of the most common tools for bridging a valuation gap between what a seller believes the business is worth and what a buyer is prepared to pay today. Done well, they align incentives and keep the seller engaged through the transition. Done badly, with metrics that are too complex, too short a timeframe, they create resentment on both sides. The structure matters as much as the headline number.

For founders retaining a stake post-deal, the key questions are around governance: what decisions require your input, what protections exist if things change, and what does the path to full exit look like? These aren’t awkward questions to ask. Any serious buyer should expect them.

This was the thread running through the whole session – technology readiness matters in M&A and exits more than most founders realise and leaving it too late is a costly mistake.

For acquisitions, tech is what makes a buy & build strategy actually work. A strong, scalable platform means you can absorb bolt-on businesses smoothly, without integration headaches or the risk of the combined business not being fully valued at exit. The businesses that execute buy & build well aren’t just good at finding targets; they have the infrastructure to bring them in cleanly.

For exits, the picture is slightly different but equally important. Buyers need to understand your value drivers quickly and with confidence. That requires clarity in your strategy, clarity in the metrics that evidence it, and data that supports both. Businesses that can clearly demonstrate their performance indicators, customer base, and revenue quality give buyers fewer reasons to chip the price.

There’s also a less obvious advantage. A business with mature, well-documented technology can be positioned as either a platform for further acquisitions or a bolt-on for a larger acquirer. That flexibility creates competitive tension in an exit process, which is one of the most effective ways to protect your valuation.

A useful way to think about the stakes: take any tech improvement that would drive meaningful revenue or margin, multiply it by your expected exit multiple, and you quickly arrive at a multi-million-pound reason to prioritise it.

Some of the most perceptive questions submitted touched on what happens after the deal closes, particularly how to preserve a business’s culture and agility once it becomes part of a larger group. It’s a real risk, and one that acquirers don’t always take seriously enough until it’s too late.

Culture clashes don’t show up in financial due diligence. They show up six months post-close, when retention starts moving in the wrong direction and the people you bought the business for start leaving. The businesses that integrate well tend to be deliberate about it from day one, clear about what’s changing, honest about what isn’t, and genuinely curious about what the acquired team does well.

For sellers, it’s worth asking the same questions of your acquirer that they’ll be asking of you. What’s their track record? How do the founders they’ve backed describe the experience? The right partner matters as much as the right price.

Sophie was asked directly: what do you wish founders had focused on before coming to the table? The answer comes back to the same things every time, a backable management team, clean financials, and clearer data across all areas of the business.

Timing matters here more than people realise. Any fundamental changes to your technology or systems need to be completed ideally six to twelve months before exit, not so you can show a buyer a shiny new platform, but so the business has had time to actually benefit from it. Improvements that aren’t yet generating results won’t move your valuation.

If you’re 18 to 24 months out from a transaction, whether that’s an acquisition or an exit, the practical priorities are: data projects that help you understand and clearly articulate your customer base, systems that are fit for scale without being over-engineered, and where relevant, evidence of cross-sell or revenue synergies from any acquisitions you’ve already made.

None of that is complicated. Most of it is good business hygiene with a commercial lens applied. The founders who arrive at a deal process with this in place move faster, maintain competitive tension, and leave fewer chips on the table.

If you’re thinking about M&A or exit readiness in the next two to three years, the preparation starts now.

This piece draws on themes from a recent M&A and exit readiness webinar attended by YFM Investment Director Sophie Tainton.