Pre-Exit: Preparing the Business for Sale

Lesson 7 of 8 in the Startup Mastery series

Every founder imagines the moment an acquirer comes knocking. Far fewer think about what happens in the 12–18 months before that conversation — the period that determines whether you capture fair value or leave millions on the table. Having helped businesses prepare for private equity exits for over 30 years, I can tell you that the preparation phase is where deals are won or lost.

This lesson is about making your business sale-ready — not in a last-minute scramble, but as a deliberate, structured programme that positions every asset for maximum value.

What Drives Revenue Multiples in SaaS M&A

Before preparing for exit, founders need to understand what actually moves the needle on valuation multiples. In SaaS M&A, the headline metric is typically a multiple of Annual Recurring Revenue (ARR), but the range is enormous — from 3x for a slow-growth, high-churn business to 20x+ for a category-defining platform.

Key Drivers of SaaS M&A Multiples

The last row is the one most founders ignore. Two companies with identical financial metrics can command materially different multiples based on how well their intangible assets are documented and presented. A buyer who can clearly see the value of your technology platform, customer relationships, brand equity, and proprietary data will pay more — because they can model the return with greater confidence.

The Data Room: Your Business in a Box

The virtual data room is the single most important deliverable in any M&A process. It is the curated repository of every document a buyer needs to evaluate your business. A well-organised data room signals professionalism, reduces friction, and accelerates the deal timeline. A messy one creates doubt, invites aggressive re-pricing, and can kill deals entirely.

Normalised EBITDA: The Number That Matters

Reported EBITDA is rarely the number used to price an acquisition. Buyers and their advisors will "normalise" EBITDA by adjusting for items that do not reflect the ongoing earning power of the business under new ownership. Understanding — and proactively presenting — your normalised EBITDA is one of the highest-leverage activities in exit preparation.

Common EBITDA Addbacks

The gap between reported and normalised EBITDA can be substantial. In NovaTech's case, as we shall see, it was the difference between £8M and £12M — a 50% increase that directly flows through to enterprise value at the deal multiple.

Quality of Earnings: The Buyer's Verification

A Quality of Earnings (QoE) report is the buyer's independent verification of your normalised EBITDA. Commissioned by the acquirer (though vendors increasingly prepare their own), it is the single most scrutinised document in the transaction.

A vendor-initiated QoE — sometimes called a sell-side QoE — is a powerful move. By commissioning your own QoE from a reputable firm before going to market, you achieve three things: you identify and fix any issues before buyers find them, you set the normalisation narrative on your terms, and you signal confidence and transparency.

The QoE typically covers revenue quality (how much is recurring vs one-off), customer concentration, working capital normalisation, and the sustainability of margins. For SaaS businesses, expect deep analysis of cohort retention, expansion revenue, and the difference between contracted ARR and recognised revenue.

Earn-Outs: When Buyer and Seller Disagree on Value

An earn-out is a mechanism where a portion of the purchase price is contingent on the business achieving certain targets post-completion. Earn-outs are used when buyer and seller cannot agree on value — typically because the seller believes the business will grow faster than the buyer's model projects.

Earn-outs sound reasonable in principle. In practice, they are the single most litigated provision in M&A contracts. The problems are structural: the seller no longer controls the business, the buyer may underinvest in the earn-out products, accounting treatments can be changed, and the definition of "achievement" is often ambiguous.

Earn-Out Risk Mitigation

The best earn-out is no earn-out. If your pre-exit preparation is thorough — particularly the normalised EBITDA, QoE, and intangible asset documentation — you are far more likely to close at a fixed price, because the buyer has the evidence they need to underwrite the value without contingent mechanisms.

Documenting Intangible Assets for Maximum Deal Value

This is where most sellers leave the most money on the table. In technology M&A, intangible assets typically represent 70–90% of enterprise value. Yet most sellers present their intangibles as a single goodwill figure buried in the accounts — invisible, unsubstantiated, and easy for buyers to discount.

Buyers will conduct a Purchase Price Allocation (PPA) after completion, assigning the purchase price to identified intangible assets under IFRS 3 or ASC 805. The categories they assess include technology (proprietary platforms, algorithms, patents), customer relationships (contracts, retention, lifetime value), brand and trade names, assembled workforce, and data assets.

If you have already identified, categorised, and valued these assets before going to market, you achieve two things. First, you make the buyer's PPA easier, which reduces transaction friction. Second — and more importantly — you anchor the conversation around the full value of what they are acquiring, rather than leaving buyers to discount what they cannot see.

The Opagio Valuator provides exactly this capability: a structured intangible asset register with recognised valuation methods that buyers and their advisors can verify. For a deeper understanding of the asset categories involved, explore the intangibles glossary.

NovaTech Scenario: The PE Approach

NovaTech has reached £50M ARR with 135% Net Dollar Retention, growing 45% year-on-year. The AI-powered supply chain analytics platform serves 340 enterprise customers across 12 countries. An inbound approach arrives from a mid-market PE firm offering 10x ARR — a headline valuation of £500M.

Sarah, NovaTech's CEO, makes three critical decisions that shape the outcome.

Decision 1: Hire an M&A Advisor. Sarah engages a specialist technology M&A advisory firm. The 2% fee feels painful on a £500M deal — but the advisor identifies three additional PE firms to create competitive tension, pushing the final offer from 10x to 10.5x ARR. The advisory fee pays for itself several times over.

Decision 2: Commission Vendor Due Diligence. The advisor recommends a sell-side QoE and a vendor technical due diligence report. Reported EBITDA is £8M. After normalisation — adding back £2M of founder salary above market rate, £1.2M of one-off IP litigation costs, and £800K of share-based compensation expense — normalised EBITDA is £12M. This 50% uplift reframes the pricing conversation entirely.

Decision 3: Document Intangible Assets. Using Opagio's Growth Platform, NovaTech produces a comprehensive intangible asset register. The PE firm's advisors value these intangibles at £420M — 84% of the £500M enterprise value — broken down across technology capital (£180M), customer relationships (£140M), proprietary data assets (£55M), brand and trade names (£30M), and assembled workforce (£15M).

What Comes Next

In Lesson 8, we follow NovaTech through the transaction itself — the SPA, completion accounts versus locked box, cap table waterfalls, BADR tax relief, escrow mechanics, and what founders do after the cheque clears.

Mark Hillier is Co-Founder and Chief Commercial Officer at Opagio. He has spent more than 30 years as a senior commercial property advisor and growth leader, helping businesses scale nationally and prepare for successful PE exits. His clients have included Legal & General, AEW UK Investment Management, and Salmon Harvester.