A company’s exit is often viewed as an endpoint, but for the Chief Financial Officer (CFO) of an investor-backed business, exit readiness should be a core, ongoing responsibility.
In the shifting landscape for mergers and acquisitions (M&A), CFOs need to be more than just financial bookkeepers; they must prepare an exit strategy to lead their company through complex diligence processes and valuation assessments.
Proven operators Steve Isom, CFO of Bloomerang, and Tom Pierce, Managing Director of Consero’s CFO Advisory Services, share the importance of building a defensible information foundation (audited financials, monthly ops pack, data room), proactively surfacing and remediating risk, and leading cross‑functional readiness so diligence focuses on growth, not cleanup.
M&A Landscape
The Federal Reserve’s dramatic interest rate increases since 2022 have created a restrictive environment, but as rates begin to ease, a surge in M&A activity is expected.
Between half and two-thirds of high-growth companies will receive an inbound offer at some point. Compared to the 2020–2021 low-interest environment, CFOs must prepare for increased diligence and tougher valuations, as well as planned and unsolicited exit opportunities.
The Strategic CFO Gap at Investor‑Backed Companies
Many private equity firms aren’t confident in the current CFO’s ability to steward a successful exit. According to a PE-Xclerate survey of private equity firms, 85% say they don’t consider the CFOs at their portfolio companies high performers, and 80% would replace the in-seat CFO if practical.
Firms are actively seeking CFOs who can prepare a company for an exit within a 12-18-month timeframe.
The traditional profile of a CPA focused on “ticking and tying” numbers and daily operations is no longer sufficient. Instead, a strategic CFO is needed to instill confidence and drive shareholder value.
In the current environment, successful exits require CFOs to be fluent in all aspects of the business, not just finance.
Start Strategic Exit Preparation from Day One
You don’t get to choose the timing of interest; readiness must be always on. Being unprepared will lead to lost opportunities and a significant loss of value.
CFOs should begin exit preparation on day one, with a focus on building a data room and ensuring all information is transaction-ready.
- Start now, especially if you’re new. Preparation should occur well before a transaction is imminent.
- When an acquirer calls, “we’re not ready, give us 60 days” is not acceptable.
- Step one: build your own data room using standard diligence request lists; keep it current.
- Set a specific target sale date (three months to three years) to guide preparation, as transactions are nearly certain for institutionally backed companies.
Financial Readiness & QoE: Make It Your Operating Rhythm
The quality of earnings analysis is pivotal in exit preparation, directly influencing valuation and deal certainty.
QoE analysis is a critical component of exit readiness, but it shouldn’t be a one-time exercise. Diligence artifacts should be treated as part of monthly operations, not midnight one‑offs.
- Audited financials and QoE readiness are table stakes for showing that your company’s financial house is in order, especially for financial sponsors requiring leverage.
- Don’t pretend perfection; present reality and the journey ahead (e.g., don’t sell a $25 million ARR business as if it’s “ultimate end‑state”).
- Operate with a monthly operations pack you can speak to fluently; avoid scrambling to build bespoke deal materials.
- If you send data, answer the “why” behind each request. Don’t just dump raw files.
- Understand the buyer’s perspective: strategic acquirers vs. financial sponsors have different diligence needs. Strategic acquirers use financial diligence to confirm no red flags, while financial sponsors require detailed scrutiny.
Valuation, Capital Structure & Risk: Know the Waterfall
CFOs must model who wins and how much—before negotiating. Understanding investor expectations, waterfall structures, and hurdle rates will help effectively manage risk and negotiations.
- Understand the entry multiple, terms, and waterfall from prior rounds.
- Know investor hurdle rates (e.g., 3–4x MOIC over 4–5 years); a lower multiple can still be attractive if IRR is strong.
- Balance hard‑nosed diligence with relationship continuity if you plan to stay on post‑deal
Growth equity investors typically target a 3–4x return over 4–5 years.
Customers & Sales Contracts: Core to Valuation
Profitability by customer and clean contract terms directly drive enterprise value. Analyzing customer bases and sales contracts is foundational to maximizing valuation during an exit.
- Segment customers by profitability and growth; don’t hide loss‑making bespoke deals.
- Track CSAT/NPS, new/renewal pipeline, unit economics.
- Read your contracts: avoid landmines like unlimited liability clauses.
- Map and address churn drivers; prep customer references (champions vs. detractors).
“Have you segmented and analyzed your customer base from profitability and growth potential? I’ve seen companies that had not done that and were losing substantial money with certain customers.”
Legal, HR, and Operational Hygiene
Legal, HR, and operational issues can derail a deal. CFOs must ensure all areas are transaction-ready, not just finance.
- Review and update privacy policies, service agreements, and legal terms.
- Ensure HR and legal teams are aligned and prepared.
- Address any “boring” but critical issues early (e.g., website policies, contract terms).
- Use outside counsel to create an “issues list” and address potential deal breakers proactively.
Be Proactive in Diligence: Call Out Issues First
Lead with known issues and your remediation plan to control the narrative.
- Common gap: sales‑tax nexus (especially sub‑$30M revenue).
- Proactively disclose: “Here’s the issue; here’s what we’re doing about it.”
- Avoid the “back foot” dynamic where a third party “discovers” problems and drives the agenda.
Orchestration: Balancing BAU with Deal Prep (HR, Legal, Ops)
Make readiness a day‑to‑day habit across functions, even those not reporting to you.
- Own an issues list with outside counsel (privacy policy, license terms, etc.); burn it down early.
- Whether or not HR/legal roll up to you, partner deeply. The CFO ultimately owns the transaction.
- Bloomerang example: Post‑investment issues list in 2020; 6x topline growth before recap; fewer “boring” legal cleanups in the next deal.
“We worked with outside counsel on an issues list—none were deal‑stoppers then, but they would be later. We knocked them out early.”
Common Mistakes & Your Rapid Response Plan
Many CFOs underestimate the work required for exit strategy. If the inbound arrives Friday of a holiday weekend, are you prepared accordingly?
Overconfidence in readiness (“we’re generally ready”) is dangerous.
Don’t try to “grind it out yourself”; you need a controller/FP&A team to keep the trains running while you’re in deal mode.
Sophisticated buyers expect speed.
Every micro‑interaction (file format, accuracy, timeliness) builds or erodes confidence.
“Often it’s the smaller deals that take longer because the business isn’t ready. Know the hot buttons and have answers.”
Diagnostics & Scorecards: Prove Readiness Visually
If a buyer is still debating your close process in diligence, you’re already losing the narrative.
Use a structured diagnostic to turn red‑yellow‑green business areas into an improvement plan, and then an evidence exhibit for buyers.
- Scorecard dimensions included: baseline F&A, systems/integrations, team structure & skills, month‑end close timing, etc.
- Show “before/after”: Reds turned green, with a few yellows and specific remediation.
“We want diligence checkmarks in finance, accounting, and legal so buyers focus on market and competition.”
Accelerating Diligence with Finance as a Service (FaaS)
A capable team is essential for CFOs to manage exit preparation alongside day-to-day operations. A FaaS partner like Consero will stabilize the back office fast so the CFO can focus on value creation.
- Full‑stack FaaS (new tech stack + accounting team and processes) stood up in 21 days; audit ready by early the next year.
- Benefits in a deal: talent continuity, ability to scale up during transactions, and after‑hours support when timelines compress.
“We were up and running in 21 days with a full Finance as a Service stack—and when the inbound hit, our lead at Consero pulled an all‑nighter to clear accounting diligence.”
You focus on value creation. We handle the details.
Schedule ConsultationThe CFO’s Mandate, Career Upside & Team Alignment
The CFO is the tip of the spear: steward of shareholder value, leader of the exit, and cross‑functional educator.
Your #1 job in an investor‑backed company is getting to an exit—readiness is part of the day job.
“If you get through a successful transaction and really shine, you’re minted as a CFO—people associate you with winners.”
Action Checklist (Start This Week)
“Start the conversation with your CEO and executive team about exit readiness. Begin with the end in mind.”
