Optimising Value: How to Sell Your Business Without Leaving Money on the Table
When founders think about maximising the value of their exit, they typically focus on the headline price. They imagine tense negotiations where every percentage point is contested, where their advisor's persuasive skills extract premium terms from reluctant buyers. This picture is not wrong, but it is incomplete.
The reality is that most value in M&A transactions is created or destroyed before any negotiation begins. The decision to run a competitive process rather than negotiate with a single buyer can add 50 to 100 per cent to the outcome. The presentation of financial metrics can shift valuation by turns of the multiple. And the mechanics of working capital adjustments, earnouts, and escrows can erode the headline price by meaningful amounts that founders never anticipated.
Optimising value requires understanding all the places where value is created and lost. The founders who achieve exceptional exits are not necessarily better negotiators. They are better prepared.
The Value Gap Most Founders Miss
The gap between headline price and actual proceeds is consistently larger than founders expect. A transaction announced at $50 million enterprise value rarely delivers $50 million in proceeds. Working capital adjustments, escrow holdbacks, transaction expenses, and earnout uncertainty all reduce what the seller actually receives.
Consider a typical mid-market transaction. Working capital adjustments can move 1 to 2 per cent of transaction value. Escrows hold back 5 to 15 per cent for potential indemnification claims. Earnouts, if present, pay significantly less than face value on average. Transaction costs, including advisor fees, legal expenses, and other closing costs, add further reduction.
A founder expecting $50 million might receive $42 million at closing, with another $5 million in escrow at risk for 12 months and $3 million in earnouts that may or may not pay out. Understanding this arithmetic before entering a process allows founders to evaluate offers accurately and negotiate terms that protect value.
The Competitive Process Premium
The single most important decision in optimising value is whether to run a competitive process or pursue a proprietary transaction with a single buyer. Research from Focus Bankers indicates that competitive sales processes can result in 50 to 100 per cent increases in offers compared to proprietary sales.
This finding is not surprising when you understand the dynamics. In a proprietary sale, the buyer knows they are the only party at the table. Their goal is to acquire the asset at the lowest price the seller will accept. They have no reason to pay more than necessary, and every reason to anchor low.
In a competitive process, multiple buyers compete for the same asset. Each knows that offering too little risks losing the opportunity to a competitor. The psychology shifts from "how low can we go" to "what do we need to pay to win." The seller captures value that would otherwise accrue to a single buyer.
The same research found that in auctions won by strategic bidders, the average premium above recent trading value was 46.4 per cent. Strategic buyers with clear synergies often pay meaningful premiums when forced to compete. Without competition, those premiums rarely materialise.
The implication for founders is clear: running a genuine competitive process, with multiple interested parties creating real tension, is the highest-value activity in any exit. No negotiation tactic, no clever positioning, no financial engineering compares to the leverage created by a second bidder willing to pay more.
Working Capital: Where Value Quietly Disappears
Working capital adjustment is the mechanism most likely to surprise founders at closing. According to SRS Acquiom analysis, working capital purchase price adjustments are now virtually ubiquitous, present on more than 90 per cent of private target M&A deals. The average adjustment owed to buyers is roughly 0.9 per cent of transaction value.
The concept is straightforward. A business requires a certain level of working capital to operate. When you sell, the buyer acquires both the business and the working capital needed to run it. The purchase agreement specifies a target level. If actual working capital at closing differs from target, the price adjusts accordingly.
The complexity emerges in execution. How is working capital calculated? Which items are included? What happens if actual working capital exceeds or falls short of target? How are disputes resolved? These questions determine whether working capital becomes a source of value creation or leakage.
Founders can protect value by understanding their working capital patterns deeply before entering a process. What is the true normalised level required to operate? How does it vary by season or month? What adjustments will buyers likely propose? Armed with this knowledge, founders can negotiate targets that accurately reflect their business and resist attempts to artificially depress the calculation.
Earnouts: Understanding What You Are Actually Getting
Earnouts tie a portion of purchase price to post-closing performance. They bridge valuation gaps when buyer and seller disagree about future prospects. In theory, they allow sellers to participate in the upside they believe the business will achieve.
In practice, earnouts consistently underperform expectations. SRS Acquiom data shows that earnouts pay approximately 21 cents per dollar across all deals. A seller who accepts a $10 million earnout should expect to receive somewhere between $2 million and $3 million, not the full amount.
Multiple factors contribute to this shortfall. The same analysis indicates that 68 per cent of deals with earnouts include multiple earnout metrics. This complexity creates more opportunities for underperformance and dispute. A seller might hit revenue targets but miss margin targets, receiving only partial payment.
Post-closing control issues compound the problem. Once the transaction closes, the buyer controls the business. Decisions about investment, pricing, staffing, and strategy all affect earnout achievement. A buyer with different priorities than the prior owner may make choices that optimise their returns while impairing earnout achievement.
The practical implication is that founders should heavily discount earnout components when evaluating offers. A $50 million headline price with $10 million at closing and $40 million in earnouts is not equivalent to $50 million cash. It is more like $10 million guaranteed plus perhaps $8 million in expected earnout value, not $50 million.
EBITDA Add-Backs: The Multiplier Effect
When buyers value your business as a multiple of EBITDA, every dollar of legitimate EBITDA is worth multiple dollars in purchase price. Forvis Mazars data shows year-to-date 2025 multiples averaging 7.2x TEV/EBITDA in the mid-market, with transactions between $100 million and $250 million commanding approximately 10.0x.
This multiplier effect makes EBITDA normalisation critically important. A $100,000 expense that can be legitimately added back to EBITDA becomes $720,000 to $1 million in enterprise value at these multiples. Overlooking legitimate add-backs leaves substantial value on the table.
Common add-backs include owner compensation above market rates, one-time legal or professional fees, expenses related to the transaction itself, and redundant costs that a buyer would eliminate. Less common but equally valid add-backs might include expenses from discontinued operations, costs of facilities being consolidated, or investments in growth initiatives that depress current profitability.
The key word is "legitimate." Buyers conduct due diligence on add-backs and challenge those they view as aggressive. Overstating add-backs erodes credibility and can trigger broader scepticism about financial representations. The goal is to present a complete and defensible normalised picture, not to inflate numbers that will not survive scrutiny.
Protecting Value Through to Closing
Value optimisation does not end when terms are agreed. The period between signing and closing presents numerous opportunities for value to erode if founders are not vigilant.
Business performance during the transition period directly affects outcomes. Earnouts often reference performance periods that begin at closing. Working capital is measured at closing, not signing. Buyers may have termination rights if performance deteriorates materially. Maintaining focus on operations throughout the process is essential.
Deal structure affects certainty of receipt. All-cash consideration at closing is certain. Stock consideration carries market risk. Earnouts depend on future performance. Escrows remain at risk for indemnification claims. Founders should understand the certainty profile of their consideration and negotiate to maximise guaranteed proceeds.
Representations and warranties create ongoing exposure. The statements you make about your business in the purchase agreement can be the basis for post-closing claims. Careful drafting that limits representations to knowledge, qualifies them appropriately, and caps exposure protects value that could otherwise be clawed back.
The Advisor's Role in Value Optimisation
Experienced M&A advisors understand all these dynamics and structure processes to maximise value at each stage. They run competitive processes that create genuine buyer tension. They position businesses to command premium multiples. They negotiate working capital targets that protect against adverse adjustments. They structure earnouts to maximise payment probability. And they manage the signing-to-closing period to prevent value leakage.
The best advisors add value that far exceeds their fees. The competitive process premium alone, at 50 to 100 per cent uplift, dwarfs any reasonable success fee. Combined with improvements in working capital treatment, earnout structure, and representation exposure, the value creation from effective advisory more than justifies the cost.
Founders who attempt to navigate these dynamics without experienced guidance consistently leave money on the table. The complexity of modern M&A transactions, the sophistication of professional buyers, and the number of places where value can leak all argue for engaging professionals who have seen hundreds of similar situations.
If you are considering an exit and want to understand how value optimisation might apply to your situation, we welcome a confidential conversation about your options.