Business Exit Preparation: The Finance Director’s 24-Month Plan

Planning a Sale in the Next Two to Three Years?

Most business owners think about exit too late. Not in the sense that they leave it too long before selling — but in the sense that they begin preparing for a sale after the buyer conversations have started, rather than two years before. By then, the things that most affect the price — the quality of the EBITDA story, the reliability of the management accounts, the cleanliness of the adjusted EBITDA schedule, the working capital position — are fixed. There is not enough time to change them.

This guide is about what happens in the 24 months before an exit process begins: the specific work a Finance Director or CFO does to maximise the value of a business at the point of sale, minimise the risk of a price chip during due diligence, and ensure the transaction completes at the agreed terms rather than being renegotiated at the last moment.

It is written for UK business owners, founders and CEOs who are planning a sale in the next two to four years and want to understand what good exit preparation looks like — and what role finance leadership plays in it. It is also a reference for Finance Directors who have been brought in with an exit mandate and want a clear framework for the work ahead.

Exit preparation is not a project that runs alongside the business. It is a sustained programme of financial management, discipline and documentation — and the Finance Director who owns it is one of the most important investments a business owner makes in the lead-up to a sale.

Why the 24-Month Window Matters

Buyers of UK businesses conduct financial due diligence on two to three years of historical results. The financial year in which the sale process runs is the most scrutinised — but the two years before it tell the story of trajectory. A business that has grown EBITDA consistently, maintained clean management accounts, and demonstrated working capital discipline across a 24-month track record arrives at a sale process in a fundamentally stronger position than one that has a single strong year preceded by weaker or poorly documented performance.

The 24-month window matters for three specific reasons.

First, it gives you time to improve the actual numbers. A Finance Director who joins 12 months before a sale can produce a clean adjusted EBITDA schedule and good management accounts for that 12 months. One who joins 24 months out can improve gross margins, convert transactional revenue to recurring, rationalise costs and build a working capital improvement programme — changes that flow through to EBITDA and that a buyer can verify across multiple reporting periods rather than just one.

Second, it gives you time to fix things that take time to fix. Related party transactions, owner remuneration normalisation, historic accounting inconsistencies and weak financial controls cannot be resolved in a week. Many take a full financial year to wash through the accounts in a way that is visible and credible to a buyer. Starting 24 months out gives you the runway to address these issues properly rather than trying to explain them away during due diligence.

Third, it gives you time to build a track record. The quality of earnings analysis that a buyer’s advisers will conduct assesses not just the level of EBITDA but its sustainability. A business with 24 months of consistent management accounts, coherent budget versus actual commentary and demonstrable working capital management tells a better quality of earnings story than one with 24 months of basic P&L and a single good year with no supporting context.

What Buyers Are Actually Looking For: The Quality of Earnings Framework

To understand what exit preparation involves, you need to understand what buyers look for when they assess a business. In the mid-market and lower mid-market — the M&A segment where most UK owner-managed businesses will transact — the financial due diligence process is organised around a concept called quality of earnings (QoE).

Quality of earnings is not just about how much EBITDA the business generates. It is about how reliable, sustainable and repeatable that EBITDA is. Buyers apply a multiple to EBITDA to arrive at an enterprise value — but the multiple they are willing to pay is directly affected by their assessment of earnings quality. A business with £1m of EBITDA that is genuinely recurring, properly documented and growing will trade at a higher multiple than one with the same nominal EBITDA that is lumpy, poorly supported and flat. For a full explanation of EBITDA calculation, adjusted EBITDA and how multiples vary by sector, see our guide to EBITDA and exit valuation.

The five dimensions of quality of earnings

Revenue quality. Is the revenue recurring or one-off? Subscription, retainer and long-term contract revenue commands a higher multiple than project or transactional revenue because it is predictable. A Finance Director working towards exit will systematically review the revenue mix and support commercial initiatives to convert transactional income to recurring arrangements. Even a partial shift — from 20% recurring to 40% recurring — can move the multiple by 1x or more.

Customer concentration. If the top three customers represent 60% of revenue, a buyer applies a risk discount. Reducing concentration improves the quality of earnings story. The FD tracks this metric monthly and flags any deterioration.

Margin sustainability. Buyers look at gross margin and EBITDA margin over multiple periods. A margin that has been declining — even slightly — raises questions. The Finance Director’s gross margin analysis by customer, product and channel identifies where margin is being diluted and what can be done about it.

Working capital conversion. EBITDA that does not convert reliably to cash is worth less than EBITDA that does. Buyers calculate a cash conversion ratio, and a business with weak working capital management will see its valuation discounted. The Finance Director implements a working capital improvement programme specifically to demonstrate clean cash conversion ahead of the sale. For how the 13-week cash flow model supports this, see our cash flow forecasting guide.

Adjusted EBITDA defensibility. Every business will have add-backs in its adjusted EBITDA schedule. The question is whether those add-backs are well-evidenced and will survive the buyer’s scrutiny. A Finance Director prepares the adjusted EBITDA schedule proactively, ensures every add-back is documented with supporting evidence, and stress-tests each one against the most challenging interpretation a buyer’s adviser is likely to take.

The 24-Month Exit Preparation Plan: Phase by Phase

Managing the Live Sale Process: The Finance Director in the Data Room

Once a sale process is running, the Finance Director’s role shifts from preparation to execution. The data room — the secure online repository of financial and legal documents provided to potential buyers — is assembled and maintained by the FD. The British Private Equity and Venture Capital Association (BVCA) publishes guidance on data room standards used in UK private equity transactions, which represent the benchmark for what institutional buyers expect to find.

Data room financial contents

The financial section of a data room for a UK mid-market business typically includes:

The locked box mechanism and completion accounts

Most UK mid-market transactions are now structured using a locked box mechanism — where the price is fixed by reference to the balance sheet at a specific historical date, rather than being adjusted post-completion based on actual completion accounts. This approach eliminates completion accounts disputes and has become the market standard for PE-backed transactions.

The FD’s role in a locked box transaction is to prepare the locked box accounts accurately and defend their presentation during negotiations. The locked box date balance sheet must reflect the genuine working capital position of the business, and any permitted leakage — dividends, management fees and similar payments between the locked box date and completion — must be carefully tracked and agreed with buyers.

Managing EIS, EMI and R&D During the Exit Process

For businesses that have used government-backed incentive schemes during their growth phase, the exit process involves an additional layer of financial management that many founders underestimate.

EIS and SEIS investors

For companies that have raised EIS or SEIS investment, an acquisition can constitute a disqualifying event — causing investors to lose their tax reliefs — unless the transaction is structured correctly. A qualifying share-for-share exchange, where the investor receives shares in the acquiror company in exchange for their target company shares, can preserve EIS relief and avoid triggering a disposal. The FD works with the company’s lawyers and tax advisers to ensure the transaction structure is assessed against the EIS qualifying conditions on GOV.UK before terms are agreed.

EMI option holders

Where the company has an EMI share option scheme, the sale process typically triggers early exercise provisions. The FD ensures that all option holders are notified correctly, that exercises are documented within the ERS reporting framework, and that any PAYE implications are addressed before completion. The corporation tax deduction available to the company on exercise — the difference between market value and exercise price — can be a meaningful benefit in the tax computation for the final period.

R&D tax relief

Buyers conducting due diligence will review the company’s R&D claim history, the additional information forms submitted to HMRC, and any open compliance checks. The FD ensures all prior year R&D claims are properly documented, that notification forms and AIF submissions are on file, and that any HMRC queries are either resolved or properly disclosed. See our R&D tax relief guide for the post-2024 compliance requirements that buyers will specifically examine.

Common Exit Preparation Failures — and Their Cost

The majority of price chips in UK mid-market transactions are financial — and most are avoidable.

Management accounts that do not reconcile to statutory accounts. Unexplained differences between the two — common in businesses without a full-time FD — cause buyers to question the reliability of all the numbers. The uncertainty adds a risk premium to the discount rate and drives the multiple down. See our management accounts guide for how to close this gap.

R&D claims that have not been properly maintained. Buyers of technology and innovation businesses will specifically review R&D claim history. Notification forms that were not submitted, AIF submissions that are missing or generic, and HMRC compliance checks that are unresolved all create due diligence concerns that delay the transaction.

EMI scheme compliance gaps. Missed 92-day notifications, employees who breached the working time condition without the scheme being updated, or exercises that were not properly documented — these issues come to light in due diligence and create both a potential tax liability for employees and a credibility problem for the seller.

Weak cash flow conversion story. A business with strong EBITDA but poor working capital management — long debtor days, slow creditor payment, high WIP — generates much less cash than its EBITDA suggests. Buyers apply a cash conversion discount to businesses where EBITDA and cash are structurally misaligned. For how to demonstrate clean cash conversion, see our cash flow forecasting guide.

What the Right Finance Director Does That Generalists Cannot

Exit preparation requires a Finance Director who has been through this process before — not someone who is navigating it for the first time alongside the business owner. The difference is not marginal. A first-time FD in a sale process will spend the first month understanding what the buyer’s due diligence team is looking for. An experienced one will have the data room structured to pre-empt those questions before they are asked.

Specifically, an exit-experienced Finance Director:

• Knows which add-backs HMRC-approved advisers will and will not accept — and builds the adjusted EBITDA schedule accordingly, not optimistically
• Understands the difference between a locked box balance sheet that will withstand scrutiny and one that will generate a leakage claim at completion
• Has managed HMRC enquiries on R&D claims and knows what documentation to have on file before a buyer asks for it
• Has run EMI exercise processes during a sale and understands the ERS reporting, corporation tax deduction and PAYE implications simultaneously
• Has coordinated with M&A advisers, lawyers and corporate finance teams in a live transaction — and knows how to keep the process moving without creating new issues

According to the ICAEW’s business valuation guidance, the quality and consistency of financial reporting is one of the primary factors that determines whether a business achieves the upper end of its valuation range. That quality is a function of who is running the finance function — and how long they have had to build the track record that buyers will examine.

Exit Multiples by Sector: What UK Businesses Are Actually Achieving in 2026

The multiple applied to your adjusted EBITDA at exit is not a fixed number — it varies significantly by sector, business model, size, and the quality of your earnings. Understanding the realistic multiple range for your type of business is one of the most important pieces of financial intelligence a Finance Director brings to an exit mandate. It determines the target EBITDA that makes the transaction worthwhile for the owner, the ambition of the growth and margin improvement programme in the 24 months preceding sale, and the realistic enterprise value range that should inform negotiations.

The following ranges reflect UK mid-market transactions broadly. PE-backed businesses and those with strong recurring revenue, high margins or proprietary IP typically achieve the upper end or above. Businesses with customer concentration, declining margins or single-year strong performance will sit at or below the lower end.

Two observations that directly affect the Finance Director’s work in the 24 months before a sale. First, the difference between the lower and upper end of a multiple range for the same sector is typically driven by earnings quality — recurring vs transactional revenue, customer concentration, margin trajectory — all of which the Finance Director can actively improve. A business at the lower end of the professional services range (5x) that converts 20% of its project revenue to retainers and reduces its top-three customer concentration from 60% to 40% can reasonably expect to exit at the upper end (8x) on the same underlying EBITDA. That is a 60% increase in enterprise value from commercial and financial discipline, not from EBITDA growth alone.

Second, SaaS and subscription businesses are increasingly valued on ARR multiples rather than EBITDA — particularly at sub-£1m EBITDA where the growth rate is more relevant than current profitability. The Finance Director’s role in a SaaS exit mandate includes calculating and presenting ARR, MRR, net revenue retention and logo retention on a consistent monthly basis, so that buyers can apply their own ARR-based valuation methodology with confidence. For details see our SaaS Business Exit guide.

The Financial Data Room Checklist: What Buyers Expect to Find

The data room is where exit preparation is tested. Every document a buyer requests that is missing, inconsistent or poorly organised creates doubt — about the quality of the financial management, the reliability of the numbers, and the competence of the team. A Finance Director who has assembled a data room before knows which gaps trigger due diligence queries, which inconsistencies cause buyers to apply risk discounts, and which documents, if prepared proactively, pre-empt the most common price chip conversations.

The following checklist reflects the standard financial section of a UK mid-market data room. Items marked with ★ are the most commonly incomplete or disputed — they are worth prioritising in the months before the process opens.

Statutory and filed accounts

Filed accounts at Companies House for the last three years — confirmed to be consistent with management accounts and with no unresolved audit qualifications. ★ The reconciliation between filed accounts and management accounts for each year must be clean and explainable. Unexplained differences are among the most common triggers for due diligence delays.

Management accounts — full three-year pack

Monthly management accounts for each of the last 36 months including: profit and loss account, balance sheet, cash flow statement, budget versus actual analysis with written commentary, and key performance indicators. ★ Buyers’ advisers will review every month. Months where the format changed, commentary is missing, or balance sheet reconciliations are absent create questions about the consistency of financial governance.

★ Adjusted EBITDA schedule with supporting evidence

The central financial document of the data room. Year-by-year reported EBITDA, each adjustment itemised with the amount, nature and supporting documentary evidence — payslips for owner remuneration above market rate, board minutes authorising one-off items, legal invoices for non-recurring costs, management accounts commentary for normalisation items. Every add-back without supporting evidence will be challenged. Every add-back with clear evidence will typically be accepted.

Current year trading and latest management accounts

Buyers want to see current year performance throughout the process — updated monthly. A business that was performing strongly at information memorandum stage but shows a trading deterioration in month six of a process will face renegotiation. The Finance Director manages this proactively: if performance is ahead of budget, this is communicated clearly; if there is a timing issue or one-off, it is explained before the buyer raises it.

★ Financial projections — three years forward

Revenue and EBITDA projections with clearly stated, defensible assumptions. The projection model must be internally consistent — revenue growth assumptions must be consistent with headcount and cost assumptions, gross margin assumptions must be consistent with the historical trend and any explained improvement initiatives. ★ Projections that cannot be defended under questioning from buyers’ analysts — because the assumptions are vague or inconsistent — undermine the credibility of the entire financial narrative.

Working capital analysis

Historical debtor days, creditor days, stock turn and cash conversion — monthly for the last 24 months. The Finance Director should present this with a clear narrative: what the normalised working capital position is, any seasonal patterns, and what the intra-year working capital range has been. Buyers use this to set the locked box working capital assumption and to assess cash conversion quality.

★ Related party and connected party transactions

All transactions between the company and its directors, shareholders, or connected parties — three years of history, with normalisation analysis. This includes: director loans and repayments, dividends and distributions, management fees charged by holding entities, intercompany transactions, and any personal expenses processed through the business. Undisclosed related party transactions discovered in due diligence are serious — they call the integrity of the financial reporting into question and give buyers grounds for a material price reduction.

Tax — corporation tax computations and HMRC correspondence

Filed corporation tax returns and computations for the last three years, plus any open HMRC enquiries or correspondence. R&D claims — notification forms, additional information forms, claim amounts and HMRC acceptance — for each year a claim has been made. ★ R&D claims that are not supported by the required post-2023 documentation (notification within six months of the period end, AIF submission) are a specific due diligence risk in technology and innovation businesses.

Banking and debt facilities

All facility letters, term sheets and loan agreements — including any covenants and the current headroom position. Buyers acquiring a business with existing debt will conduct their own review of facility terms. Any covenant breaches or waivers in the last three years must be disclosed proactively.

EIS/SEIS/EMI documentation

For businesses that have used any of these schemes: HMRC advance assurance letters, compliance statements, share certificates, and for EMI — the option agreement, HMRC registration confirmation, exercise notices, and ERS annual return submissions. ★ Missing documentation for EMI schemes is one of the most common data room gaps in technology and start-up businesses. Buyers’ tax advisers will check every exercise and every ERS return.

Where Are You in the Timeline? What You Can Still Improve

Exit preparation is not binary — it does not only work if you start exactly 24 months out. The right starting point is whenever you are reading this. The question is what you can realistically achieve given the time available, and where to focus the Finance Director’s energy to maximise the improvement in exit value.

More than 24 months to exit

This is the ideal position. With more than two years of runway, a Finance Director can make structural improvements to the business that flow through to EBITDA across multiple reporting periods — and those improvements will be visible across the full track record that buyers will examine. Priority actions: appoint the right Finance Director now if one is not already in place; establish buyer-ready management accounts from month one; begin the revenue mix improvement programme (converting transactional to recurring); address related party transactions and owner remuneration normalisation in the current financial year, so they are already clean by the time the sale process opens.

12–24 months to exit

Still enough time to make meaningful improvements, but the window for structural EBITDA changes is narrowing. Priority actions: prepare the adjusted EBITDA schedule for the last two to three years immediately, so you know exactly what the buyer will see and where the gaps are; focus on working capital improvement — this is achievable within 12 months and directly affects both EBITDA and cash conversion quality; ensure management accounts are upgraded to buyer-ready standard as quickly as possible; address any obvious due diligence risks (undisclosed related party transactions, missing R&D documentation, EMI discrepancies) before the data room opens rather than during it.

6–12 months to exit — is it too late?

Not too late to make a material difference, but the focus shifts from improving the numbers to presenting the existing numbers as well as possible and eliminating avoidable price chips. The most valuable work a Finance Director can do in a six-to-twelve-month window: prepare the adjusted EBITDA schedule proactively and ensure every add-back is evidenced before the buyer asks; reconcile management accounts to statutory accounts for all three years and document any differences; assemble the data room documents listed above so the process can open without delay; review and resolve any related party, R&D or EMI documentation gaps. An experienced Finance Director can prevent a £500,000 price chip in a six-month window, even if they cannot increase the underlying EBITDA.

Already in a live process

The Finance Director’s role changes from preparation to execution. The priority is managing the data room accurately and responding to due diligence queries quickly and completely — delay and incomplete responses are interpreted as a sign of weak financial governance. If an experienced Finance Director is not already in place, an interim appointment can provide immediate support for the data room management, due diligence response coordination, and locked box or completion accounts mechanics. The cost of an experienced interim Finance Director for the duration of a sale process is typically recovered many times over in the price achieved and the reduced risk of completion failure.

Whatever your timeline, the starting point is the same: an honest assessment of what the adjusted EBITDA schedule looks like to a buyer, and where the gaps are between that and what you want to achieve. FD Capital’s founders have had that conversation with dozens of business owners preparing for exit. If you want a direct view of what your business looks like financially at this point, and what a Finance Director could do to improve it, call 020 3287 9501 or visit our Business Exit Preparation service page.

How FD Capital Places Finance Directors for Exit Preparation

FD Capital has placed Finance Directors and CFOs ahead of successful UK exits across technology, SaaS, professional services, manufacturing, financial services and private equity-backed businesses. Many of our placements are made specifically for an exit mandate — a business owner who has a transaction in mind within the next two to three years and needs a Finance Director who has run this process before.

Our candidates for exit preparation roles typically bring: direct experience of preparing adjusted EBITDA schedules and quality of earnings materials for mid-market transactions; a track record of producing buyer-ready management accounts consistently and on time; specific experience of the locked box or completion accounts mechanisms used in UK M&A; and hands-on experience of EIS/SEIS, EMI and R&D compliance during a sale process.

We place across all engagement models. Fractional Finance Directors for businesses that need exit preparation expertise on two to three days per week — the most common engagement model for owner-managed businesses approaching a first sale. Interim CFOs for businesses in a live sale process that need immediate, experienced resource to manage the data room, due diligence responses and locked box mechanics. Permanent Finance Directors for PE-backed businesses where exit preparation is a multi-year, full-time commitment to the fund’s return model.

Our private equity practice covers the specific requirements of PE portfolio company finance leadership — including the EBITDA reporting, covenant management and exit preparation work that distinguishes PE finance from the equivalent role in unsponsored businesses.