Why Sellers Leave Deal Value on the Table Before the Process Starts
A buyer does not pay for what you believe your company is worth. A buyer pays for what your records let them prove.
That gap opens long before a banker sends a first message to a prospective buyer. By the time a process begins, your financial statements, your customer base and your IP file already tell a story. Most sellers have not read that story the way a buyer will, and the ones who start preparing after the banker is hired leave deal value on the table before the first buyer call.
No verifiable public study puts one number on that pre-process gap, so treat any precise percentage you hear as an estimate. The evidence we do have shows where buyers look, what they find and how the cost reaches the seller. That is enough to act on.
Buyers Price What They Can Verify
Every buyer is underwriting risk. Where the record is thin, the buyer discounts the price, reshapes the structure or walks away.
The best public view of what buyers find comes from the insurance that backs their deals. Aon reports in its 2025 Transaction Solutions Global Claims Study that financial statements and material contracts remain the main drivers of loss in North American representation and warranty insurance claims. Those are claims buyers filed after closing. They show which parts of a seller's record get tested hardest, and both sit inside the seller's control long before a sale.
Accounting firms see the same pattern earlier in the process. MGO names messy financial records as the most common red flag buyers encounter in 5 Hidden Risks That Derail M&A Deals, and Windes argues in The Silent Killer: Why Inaccurate Accounting Kills Deals and How to Fix It that inaccurate accounting signals instability and gives the buyer room to demand a price cut. Several of these sources sell readiness services, and Aon brokers transaction insurance, so read each one as informed but interested.
The pattern behind the data is simple. Buyers cannot see inside your business, so they rely on the record to decide how much risk to price in. A clean record shortens the list of things a buyer can reasonably ask you to carry. A weak one lengthens it, and every item on that list becomes a point to negotiate. Aswath Damodaran frames the discipline well in a post excerpted by Columbia University Press in Narrative and Numbers, where he says "every number in a valuation has a story behind it." His examples are public companies, but the test travels. Every adjusted earnings figure you present needs a story that survives a buyer's questions.
Where Sellers Leave Deal Value on the Table
Four weak spots recur in seller-side preparation. They look unrelated, but they share a cause. Each one asks the buyer to trust something the seller cannot yet show.
Financial hygiene comes first, because price is built on earnings. A buyer adjusts earnings downward for every add-back it cannot document, and the lower figure then gets multiplied. At a multiple of 8, each $1 million of rejected add-backs removes $8 million from the price. Late month-end closes, inconsistent revenue treatment and adjustments that live in one person's memory all feed that outcome. Consistency across periods matters as much as the level of earnings, because a sudden improvement invites the buyer to ask what changed. Windes notes in the FAQ of The Silent Killer: Why Inaccurate Accounting Kills Deals and How to Fix It that buyers usually scrutinize the last 3 to 5 years of financial statements, so a cleanup in the final quarter cannot repair the history a buyer reads.
Customer concentration is a retention question, and buyers price what they cannot confirm. A buyer unsure that a large account will stay has three ways to protect itself, and they are a lower price, a deferred payment or a payment that depends on the customer staying. Contract terms, renewal history and relationships that reach beyond the owner are the evidence that moves that judgment. None of them can be built in the weeks before a process.
IP documentation comes next. Buyers pay for IP they can trace, which means signed assignments from employees and contractors, registrations held in the right legal entity and a clear map of licenses and open-source use. In Aon's 2025 Transaction Solutions Global Claims Study, intellectual property ranks as the second-most-severe breach type among claims notified more than 12 months after closing, behind only financial statements. The same study reports that 36% of insurers saw more frequent IP breaches, against 12% who saw fewer. Aon also notes that its own claims data shows no major rise in either frequency or severity, so read this as a signal worth watching and not a trend that has arrived.
An assignment gap shows how a small fact becomes a price question. The fix is usually a signature, but only if the person who should sign can still be found and is willing to sign.
Owner dependence closes the set. MGO reports in 5 Hidden Risks That Derail M&A Deals that buyers hesitate when a business cannot function without the founder's daily involvement, and that even companies with strong financials are often discounted when buyers doubt success can continue without the owner. Michael E. Gerber states the principle bluntly in The E-Myth Revisited, writing "If your business depends on you, you don't own a business—you have a job." The line overstates the case for a company with a capable management layer, but the buyer's test is the same. If revenue, relationships and decisions run through one person, the buyer is acquiring that person's availability. A buyer who doubts the answer can lower the price or ask the owner to stay involved after closing.
The Closing True-Up Is Not Where the Money Goes
Some sellers treat the post-closing purchase price adjustment as the test of whether they were ready. The data says it is a small test. SRS Acquiom analyzed more than 1,570 private-target acquisitions that closed from 2020 through the third quarter of 2025 in its 2026 M&A Working Capital Purchase Price Adjustment Study. Buyers opened with a claim in 57% of those deals, yet final buyer-favorable adjustments averaged 0.76% of transaction value, with a median of 0.27%.
Those figures describe one narrow mechanism. My reading is that the larger cost arrives earlier, in the price a buyer is willing to offer and the structure it insists on. That reading is a judgment, not a finding of the study. Sellers leave deal value on the table well before a closing statement exists, and a seller who checks the true-up to measure readiness is checking the wrong number.
How Small Concessions Compound
The cost of poor preparation rarely arrives as one labeled discount. It builds through a series of concessions that each look manageable.
Structure matters as much as the headline number. A high offer with large contingent payments and heavy indemnity exposure can be worth less than a lower offer with more certainty. The number to watch is what you can expect to keep, when you will receive it and what obligations remain afterward.
Preparation Takes Longer Than a Process Does
Buyers read history, not intentions, so clean records take time to build. A customer contract renews on its own calendar. A former contractor who never signed an IP assignment has to be found and asked, sometimes after the relationship has ended. Once a process starts, none of those clocks speeds up.
Published guidance does not agree on how much time is enough. Windes advises owners to start 12 to 24 months before listing in The Silent Killer: Why Inaccurate Accounting Kills Deals and How to Fix It, while Intellicents calls the 12 to 36 months before a transition the most important window in many cases in The 12–36 Month Period That Can Influence Exit Readiness. Treat those as ranges that move with how much needs fixing, not as rules.
Grant Thornton UK reaches a similar conclusion from a British vantage point. It warns in Exit readiness: Preparing for a successful transition that businesses without early, structured exit planning often face value leakage, prolonged negotiations and reduced buyer confidence. Christopher Snider, CEO of the Exit Planning Institute, puts the cost of delay plainly. "Inaction is your enemy and is often a root cause of poor transition success," he writes in Walking to Destiny, as quoted in Fall into the Value Acceleration Methodology. Delay rarely produces one bill. It produces the concessions described above.
Preparation has limits, and it is worth stating them. Some sellers do not control their timing. A health event, a partner dispute or an unsolicited offer can force a sale. Early preparation does not guarantee a higher price, and some buyers will pay well for a strong business with untidy records. What it does is remove the buyer's best reasons to lower the offer. It also widens your choices. In the framework described in Fall into the Value Acceleration Methodology, the Exit Planning Institute has owners decide, after each round of preparation, whether to harvest the value they have built or keep building it. A company that has done the work is not committed to sell.
Intangibles Raise the Stakes on Documentation
Ocean Tomo reports in Ocean Tomo Releases 2025 Intangible Asset Market Value Study Results that intangible assets made up about 92% of S&P 500 market capitalization at the end of 2025, up from 17% in 1975. That index covers large listed U.S. companies, so it does not measure a mid-market business. It does point in the same direction as the claims data. Value no one can touch is only as strong as the paper behind it.
Accounting standards, disclosure duties and deal conventions differ by country. The studies cited here mostly reflect North American deals and U.S. listed companies, with Grant Thornton UK adding a British view. Test each point against the rules and practice in your own market with an adviser who works there.
Questions Worth Answering Before You Hire a Banker
A banker can present a company well. A banker cannot create a record that does not exist. Four questions test whether yours does:
Could an outside accountant rebuild your earnings from source records, including every adjustment you plan to claim?
If your largest customer left next year, which contract terms and relationships would protect the revenue?
Can you show who owns each piece of IP, how it reached the company and which licenses touch it?
Which relationships, decisions and know-how depend on you alone, and who else could carry them?
Start with the one you answered with the least confidence. Sequence matters here, because every other buyer judgment rests on the financial record, so settle that first and then take on the items with the longest lead times. Then ask a qualified adviser to review the company the way a buyer would, and to rank what they find by its effect on price and deal certainty. That review shows what a buyer would find in the first week of diligence, and how much of it you could fix in the next 12 months before you leave deal value on the table.
This article offers general educational information and is not legal, tax, accounting or investment advice. Sale processes, valuations and contract terms vary by company and jurisdiction, so consult qualified, licensed advisers before you act.
Prepare the Record Before a Buyer Reads It
Aspirations Consulting Group works with executives at moments when the stakes rise, including growth that outpaces the organization, a planned sale or recapitalization, a leadership transition and sustained performance pressure. The firm helps leadership teams see the issue clearly, build a strategy that holds up under scrutiny and carry it through finance, operations, people and ownership. Learn how the firm supports leaders at these inflection points, guided by Clarity. Strategy. Impact.™
Bring Weekday Insights to Your Next Decision
Request a complimentary subscription to ACG Strategic Insights and join more than 10 million current and aspiring executives who read practical perspectives on leadership, business and finance every weekday.
Thanks for reading!
~ Jerry Justice
Living to Serve, Serving to Lead™
Comments