M&A Tips: Deal or No Deal? How Financials and Operations Tell Your Story

Every deal starts with a story — growth, opportunity, transformation. But behind every story is a set of numbers that must withstand scrutiny. When those numbers make the story clear and consistent, buyers lean in. When they don’t, confidence fades quickly. In M&A, it really does come down to one question: Deal or no deal?

Buyers want clarity, consistency and confidence — not guesswork. When sellers get this right, they inspire trust and command stronger valuations. You can deliver the world’s most compelling pitch, but buyers will hesitate if your financials are unclear or inconsistent.

Here’s how to make sure your numbers set you up for “Deal” instead of “No Deal.”

Messy Books = No Deal

There’s no sugarcoating it: disorganized financials make deals harder, slower and riskier.

We’ve seen it all at Sikich — personal expenses mixed into company cards, “creative” bookkeeping that strays from GAAP and line items that could star in a mystery novel. When the numbers don’t add up, deals slow down, diligence drags, buyer confidence fades and trust takes a hit.

The fix is straightforward: get your financial house in order before you approach the deal table. Know your expenses, understand your records and present a financial picture that’s clear, accurate and defensible. The truth is that buyers don’t want to play detective. If they must, it’ll show up in a lower valuation or a lost deal.

If you feel that your situation is too messy, don’t panic. An experienced transaction advisory team can help clean up the details so you can focus on the deal.

Financial Consistency is Your Friend

Buyers love consistency. Consistent numbers means lower risk.

Inconsistencies like margins swinging wildly from quarter to quarter, unexplained revenue fluctuations or shifting accounting methods are cause for digging deeper. Cue the questions:

• Are there revenue recognition issues?
• Has the accounting method changed?
• What’s happening with Work-In-Progress?

None of these are deal breakers on their own, but, again, they send the same message: we need to dig deeper.The fix: take a hard look at your gross or contribution margins before you go to market. Smooth, predictable results signal stability.

Operations Continue the Story

Let’s flip the script for a minute. You’re the buyer. The financials look fine, maybe even great. But the red flags start showing up in the operations.

Beware of this trap: it’s tempting to fall in love with the numbers on paper. But financials alone don’t tell the full story. Operational inefficiencies, cultural mismatches or buried risks can drain profitability post-close.

That’s why an operational efficiency assessment is key. It helps you:

• Project future profitability with confidence
• Spot hidden roadblocks before they damage your resources
• Decide whether fixing issues is worth the upside

Don’t let sunk-cost bias talk you into a bad deal if the reg flags are too heavy. Sometimes walking away is the smartest — and most profitable — move.

Working Capital Keeps the Business – and Deal – Moving

Analyzing working capital is where due diligence gets technical but critical. Simply, working capital is the cash a business needs to run day to day. In middle-market deals, buyers expect enough working capital to keep operations running smoothly post-transaction. Sellers who normalize their working capital cycles ahead of a sale clearly signal stability. Buyers who see this gain confidence and approach negotiations with less concern.

Keep these in mind at the deal table:

• Expenses: Some costs disappear post-acquisition thanks to synergies. Plan for what stays and what goes, not just on day one, but six months in.
• Personnel: Will you need to add to the team with a seasoned CFO or boost the sales team? Adjust working capital expectations accordingly.
• Long-term plans: What’s the company’s vision for working capital? Would it make private equity investors lean in or lean out?
• Balance sheet reality check: Look at A/R and inventory turnover. If receivables take forever to collect but inventory is flying off the shelves, liquidity might not look as strong as you think. Don’t overlook accounts payable or missing accrued expenses either.

Working capital negotiations can get sticky but being prepared puts you in control.

Calling All C-Corporations: Small Business Stock Benefits

If you own a C-corporation, you’ll really want to pay attention to this. Under Section 1202, certain C-corporation stock may qualify as Qualified Small Business Stock (QSBS). Translation: you could be eligible for up to a 100% gain exclusion when you sell — potentially tax-free gains.

The catch? Not all stock qualifies. The rules are complex. If you think you might be eligible, bring in your advisors early. The payoff can be massive but only if you follow the rules.

The Bottom Line

Financials are the backbone of every deal and the foundation of trust. Messy books slow and harm the process. Inconsistent margins raise tough questions. Weak working capital management or overlooked operational issues can shift a “yes” into a “maybe” – or even a hard “no.”

A buyer’s trust and your leverage come when your numbers are clean, margins steady and your story backed by sound operations. Whether you’re thinking about selling or just getting deal-ready, now’s the time to get your financial house in order. Don’t wait until the diligence phase starts. Sikich’s Transaction Advisory Servicesteam helps turn complexity into clarity, uncover value drivers and position for a stronger close.

Deal or no deal? With the right preparation and the right team, you decide.

See what we covered in our prior “M&A Tips” article here.