Acquisition Worthiness: Are Your Document Ducks In A Row?

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Considering selling your middle market business? Make sure your company’s documents are not just a stack of papers but a clear, accurate, and well-organized representation of your company’s story. Think of these documents as a window for potential buyers, offering them a glimpse into your business’s overall health, performance, and future potential. It’s not just about numbers; it’s about crafting a narrative that showcases the true value and possibilities your business holds for its future owner. In this article, we will dive into which documents you should have in order before presenting your business for sale to potential buyers.

Overview of Key Financial Documents

A meticulously organized set of financials instills confidence in potential investors, making it easier for them to evaluate the true value and opportunities your business presents. Organized financial documents streamline the due diligence process, mitigate uncertainties, and ultimately contribute to a smoother and more successful sale, benefiting both you and the future custodians of your business.

Buyers will want to assess each of the following key financial documents:

Balance Sheets

What is it?

Provides a snapshot of a company’s financial position at a specific point in time.

How will buyers assess it?

  • Asset examination: Buyers will assess the company’s assets and their liquidity and long-term value.
  • Liabilities examination: Buyers will analyze the company’s debts and obligations to understand short-term and long-term liabilities.
  • Equity assessment: Buyers will evaluate the company’s equity structure and understanding shareholders’ interests.

How to improve?

Owners should ensure that assets and liabilities are properly valued and that equity reflects the true ownership position.

Income Statements

What is it?

Summarizes the company’s revenues and expenses over a specific period.

How will buyers assess it?

  • Revenue: Buyers will look at the total income generated from sales or services.
  • Expenses: Buyers will want to understand the total costs incurred to generate that revenue.
  • Profit: Buyers will examine the company’s net income after deducting all expenses from revenue.

How to improve?

Improvements involve accurate categorization of expenses, ensuring proper revenue recognition, and highlighting key financial metrics.

Cash Flow Statements

What is it?

Breaks down cash inflows and outflows by business activities.

How will buyers assess it?

  • Cash generation: Buyers will want to identify sources of cash inflows and outflows within the business.
  • Operating activities: Buyers will evaluate the cash generated from the company’s core business operations.
  • Investing and financing activities: Buyers will analyze the cash flow from investments and financial activities, such as debt or equity.

How to improve?

Improvements involve managing working capital efficiently, optimizing capital expenditures, and ensuring proper financing.

Other Key Documents to Have Prepared

In addition to the key financial documents we’ve covered, business owners will want to ensure these additional documents are in place and in order:

Annual Budgets

What is it and how to improve?

A detailed plan of expected revenues and expenses for the upcoming fiscal year. Improvements involve aligning budgets with strategic goals and ensuring realistic projections.

Financial Forecasts

What is it and how to improve?

Forecasts project future financial performance based on different scenarios. Improvements involve thorough market research, considering industry trends, and providing a realistic growth outlook.

Accounts Receivable Aging Reports

What is it and how to improve?

Details outstanding customer invoices and helps assess the effectiveness of credit and collection policies. Improvements involve managing receivables efficiently to maintain positive cash flow.

Accounts Payable Aging Report

What is it and how to improve?

Outlines the company’s outstanding obligations to suppliers. Improvements involve managing payables to optimize cash flow while maintaining good vendor relationships.

Corporate Tax Returns

What is it and how to improve?

Provides a historical record of the company’s tax obligations. Improvements involve minimizing tax liabilities through legal means, such as tax credits and deductions.

Key Customer Contracts

What is it and how to improve?

Highlight long-term and high-value contracts that contribute significantly to revenue. Improvements involve ensuring contracts are well-documented, have favorable terms, and are transferable if needed.

Supplier Agreements

What is it and how to improve?

Details relationships with key suppliers. Improvements involve assessing the stability of the supply chain, renegotiating terms where possible, and securing alternative sources if necessary.

Employee Contracts and Agreements

What is it and how to improve?

Details the terms of employment for key personnel. Improvements involve ensuring contracts are up-to-date and considering employee retention strategies during the transition.

Employee Benefit Plans

What is it and how to improve?

Detail benefits offered to employees. Improvements involve optimizing benefit plans to attract and retain talent.

Patents, Trademarks, and Copyrights

What is it and how to improve?

Documentation of intellectual property assets. Improvements involve ensuring proper registration, protection, and transferability of these assets.

Compliance Records

What is it and how to improve?

Document compliance with industry regulations and legal requirements. Improvements involve addressing any outstanding legal issues and ensuring the business is in good standing.

Regular Management Reports

What is it and how to improve?

Provide insights into operational performance. Improvements involve tracking and improving key performance indicators relevant to the business’s success.

To enhance these financial documents, business owners should work with financial professionals, accountants, and advisors to ensure accuracy, completeness, and relevance. Thorough preparation helps build confidence among potential buyers and contributes to a smoother sales process.


If you’re considering selling your mid-market company and need assistance organizing and analyzing your key documents, visit with the seasoned advisors of Final Ascent today!

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