More than half (52%) of business owners who have sold in the past two years received a lower valuation than they had expected, according to research from City law firm Marriott Harrison LLP.
At the same time, 46% of acquirers report that mid-market businesses are rarely well prepared for sale, citing issues such as inconsistent financial records, compliance risks, and management gaps as key factors that can impact valuations or derail deals.
The research, conducted with Censuswide, surveyed both individuals who sold their mid-market businesses in the last two years and CFOs, M&A leads, and Managing Partners from both trade and private equity acquirers.
The Seller’s Perspective
- Valuations fall short: More than half (52%) of owners received less than expected.
- Preparation pays: Strengthening management teams (26%) and cleaning up financial records (24%) had the biggest positive impact on outcomes.
- Hindsight lessons: With hindsight, 22% of sellers said they should have been more selective about buyers, while 14% said they should have started preparations earlier.
- Operational strain: Running the business while managing the sale was the top-reported challenge (36%).
The Buyer’s Perspective
- Deal appetite remains strong: Over half (52%) are maintaining or increasing activity, especially in IT, SaaS, AI, and healthcare IT.
- Premium triggers: Buyers are willing to pay more for demonstrable recurring revenues or EBITDA (38%), market leadership (36%), and a robust management team willing to stay (30%).
- Red flags: The top deal-breakers include mismatched cultural fit and misaligned management expectations (18%), material legal/compliance issues (18%), and unclean financials (14%).
“Expectations and preparation are the two biggest factors shaping valuations. Sellers frequently set their sights too high, but acquirers also tell us that poor preparation makes deals harder and reduces value. In a market where buyers have the appetite and capital to invest, founders who align their expectations and get their house in order well ahead of a sale are far better placed to achieve a strong exit.”
Daisy Divoká, M&A Partner at Marriott Harrison LLP
The research has been released as part of Marriott Harrison’s M&A Playbook “Selling Your Business: Your Exit Blueprint” that gives a practical guide about the M&A process for founders, from identifying their motivation to sell and how to work out a valuation to the role of AI in the M&A process, the psychological impact of a sale and how to choose a buyer. Alongside the practical insights, the playbook offers interviews with exited business founders and other M&A specialists, including acquirers, accountants, corporate financiers, wealth managers, and a philosopher.
