The exit market has fundamentally shifted. The days of throwing together a three-year-old set of books and getting a 7x multiple on EBITDA are behind us. Buyers are smarter, lenders are tighter, and the quality-of-earnings process has become a deal killer in ways we haven't seen since 2009.

Here's what we're actually seeing in engagements right now, and what it means if you're thinking about a sale in the next 24 to 36 months.

The 36-Month Benchmark Is Real

Three years of clean, auditable financials is no longer a nice-to-have. It's the minimum viable product for a credible sale process. We're working with a defense contractor right now who had strong EBITDA but couldn't get a buyer past LOI because their revenue recognition was inconsistent across two systems and three years of books.

That's a fixable problem — but it takes 12 to 18 months to fix properly. If you start that work when you decide to sell, you're already behind.

Quality of Earnings Has Teeth Now

Two years ago, QoE was a box-checking exercise. Today, buy-side QoE teams are more aggressive than we've seen in a generation. They're adjusting add-backs, scrutinizing customer concentration, and flagging any revenue that doesn't repeat.

We've seen deals die at QoE that would have sailed through in 2021. The fix isn't to argue with the numbers — it's to clean them up before anyone else sees them.

What Deal-Ready Books Actually Look Like

Every month we see companies that think they're ready to sell because their P&L looks clean. What buyers actually want to see is different:

  • Consistent revenue recognition applied across all periods
  • Normalized owner compensation — what would you pay a replacement CEO?
  • Clean separation of personal and business expenses
  • Documented add-backs with supporting schedules
  • Customer and vendor concentration analysis at your fingertips
  • Three years of signed, reviewed financial statements

If you can't produce that package in 48 hours, you have work to do.

The Data Room Is the Deal

We've watched three deals die in the last year not because the business was bad, but because the data room was bad. Buyers are sophisticated. When they request a file and you can't produce it in 24 hours, they start wondering what else you can't produce.

Build the data room now. Update it quarterly. Treat it like a live artifact, not something you scramble to build when you get an inbound offer.

The Bottom Line

If you're thinking about an exit in the next three years, start now. The companies getting the best multiples today started their preparation before they ever talked to a banker. Clean books, systematic operations, documented add-backs, and a ready data room — that's the playbook.

We help companies build exactly that. If you want to know where your business stands today, let's talk.