Small Repairs Can Make or Break Sales
Nearly half of the letters of intent that collapsed last year didn’t die over price or financing, but over what buyers found, or couldn’t find, inside the data room. Axial’s dead-deal data puts diligence findings ahead of every other cause. This is the number owners should focus on two years before they intend to sell, because almost every problem that kills a deal at week ten was fixable when the business had time.
The uncomfortable part is that most of the work isn’t glamorous, and none of it is where founders instinctively want to spend their attention. Cleaning up an entity chart is not fun. Neither is re-signing customer contracts that were papered over an email thread in 2021. But this is the work that decides whether the closing wire matches the LOI or comes in twelve percent light.
Two Years Beats Six Months for a Reason
Six months is when your banker starts a process. Two years is when you can still change the answer to the questions a buyer will ask. That distinction matters because the diligence-critical items, such as customer concentration, contract assignability, EBITDA quality, and the way you recognize revenue, cannot be repaired inside a live deal without the buyer smelling the repair and re-pricing around it.
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Final pre-market preparation is the polish. The structural cleanup sits behind it, in the year or two before you ever engage a banker. Owners who compress the whole thing into a single quarter tend to learn, expensively, that some things cannot be sped up.
Buyers Look for the Boring Things Owners Skip
Buyers aren’t looking for perfection. They’re looking for a business whose story on paper matches the story the owner is telling, and whose paper is organized enough that they can verify it without a scavenger hunt. The items that get missed are almost always the ones that felt too boring to prioritize when the business was growing.
Financials that reconcile, trial balance, tax returns, bank statements, and the management P&L should tell the same story month by month. When they don’t, buyers tend to assume the least flattering version until shown otherwise.
Contracts that survive a change of control, anti-assignment clauses in customer and supplier agreements, are a frequent trigger for a strategic buyer’s discount. If your top ten customers each need to consent to the deal, you have ten separate points of failure.
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The Data Room Is Your First Real Test
The data room is the first honest read on whether the company is diligence-ready. Buyers form an early opinion from how documents are organized, how quickly follow-up requests are answered, and whether the files inside a folder actually match its label. A messy room signals a messy business, fairly or not.
Modern platforms don’t stop at secure hosting. They read across the corpus, flag inconsistencies between contracts and the model, and surface the missing schedule before a buyer’s associate does. Recent VDR.ai coverage on businessinsider.com describes how AI-native rooms are shifting from passive file storage to active reconciliation across thousands of documents, the kind of pass a seller’s team used to do by hand at 2 a.m. and still miss things.
There’s a simple exercise worth running twenty-four months out. Pretend a buyer sent you their opening diligence request list this morning, and give yourself ten business days to fill the room. Whatever you can’t produce, or can only produce with caveats, is the list. Work it down over the next two years.
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Owners who do this rarely regret it. The ones who don’t tend to discover, somewhere around week eight of a live process, that the deal they signed at LOI is not the deal that’s going to close. Two years is enough runway to change that outcome; six months, in most cases, is too little.
Commissioning your own quality-of-earnings analysis before you go to market is one of the highest-value moves most sellers can make. A sell-side QoE report forces you to confront the adjustments a buyer will find, on your own timeline, with the option to fix what’s fixable and to build a defensible narrative for what isn’t.
Retrades happen for a small number of repeatable reasons, and quality of earnings is the biggest one. A buyer’s QoE finds an add-back you can’t defend, or discovers that a chunk of last year’s EBITDA was really one-time, and the multiple gets applied to a smaller number. The math is unforgiving: a modest EBITDA adjustment at an eight-times multiple is a meaningful cut to the wire.
