Where to Focus Your Budget if You Want to Sell in 2025

Reading Time: 4 minutes

As your businesses gears up for its annual budgeting, you can’t forget to factor in M&A pre-sale planning, both to make the sale process smoother and to maximize your company’s value. Without careful preparation, companies can miss opportunities to boost their sale value, or even face unexpected challenges during the sale process — making it all too easy to torpedo your own sale.

Incorporating these steps early ensures a smoother transaction and helps you get the best possible outcome when it’s time to sell. With that in mind, here are some key steps to pay attention to when working M&A planning into your budget:

1. Boost Your Company’s Value Before a Sale

Budget considerations: Set aside funds for improvements that boost your company’s value, like automating processes, attracting new customers, or cutting costs.

Actions:

1. Review current performance and invest in areas that increase efficiency and appeal to buyers.
2. Conduct a market analysis to understand your value relative to competitors and find opportunities to stand out.
3. Focus on growth and efficiency improvements to make your business more attractive and ready for a smooth sale​​.

2. Budget for Essential Advisors (M&A, Legal, Tax, etc)

Budget considerations: Make sure to allocate funds for hiring critical advisors like M&A experts, an investment banker, legal, tax, and valuation specialists to guide you through the sale process and cover all the necessary due diligence. Your dream team can make or break your exit outcome.

Actions:

1. Budget for initial consultations with M&A advisors, as well as ongoing legal and accounting fees, especially for more complicated deals.
2. Set aside contingency funds for any unexpected advisory or legal costs that may arise during the process​​.

3. Clean Up Financials and Prepare for Audits

Budget considerations: Allocate funds to clean up your financials and prepare for external audits. Buyers will want clear, accurate financial records, so this step shouldn’t be neglected.

Actions:

1. Budget for external auditors and internal teams to fix any discrepancies, improve your financial reporting, and ensure everything is up-to-date.
2. Consider investing in financial management software or hiring consultants to streamline processes and present a clean, organized picture to potential buyers​​.

4. Plan for Taxes and Structuring the Sale

Budget considerations: Plan for expert tax advice on potential sale-related tax issues like capital gains, restructuring, or estate planning. These can have a big impact on how much you keep after the sale.

Actions:

1. Set aside budget for early consultations with tax experts to explore how different sale structures—asset sale vs. stock sale—affect taxes.
2. Consider if reorganizing your company could lead to a more tax-efficient sale, potentially saving you significant money in the long run​​.

5. Keep Key Employees with Bonuses and Incentives

Budget considerations: It’s essential to plan for retention bonuses, stock options, or equity incentives to keep your core employees on board during and after the M&A process. Their loyalty and expertise can significantly impact the value of the deal.

Actions:

1. Allocate budget for bonuses or stock options, especially for executives and critical staff.
2. Consider restructuring contracts or adding new incentive plans to align employee goals with the upcoming sale and ensure they stay motivated and invested​​.

6. Improve Governance, Compliance, and ESG for Buyers

Budget considerations: Allocate funds to improve governance, compliance, and ESG (Environmental, Social, and Governance) practices, which are becoming increasingly important in M&A deals.

Actions:

1. Invest in compliance: Strengthen data privacy, upgrade cybersecurity, and enhance sustainability initiatives to meet growing buyer expectations.
2. Governance upgrades: Consider adding independent board members and improving internal audit controls to boost buyer confidence and show that your business is well-run.

7. Fix Operational and IT Issues Before the Sale

Budget considerations: Make sure you’ve budgeted for any operational fixes or IT upgrades that might come up during due diligence or be flagged by potential buyers.

Actions:

1. Upgrade your tech — If your systems are outdated, invest in upgrades now. A business running on old tech can turn off buyers.
2. Bring in expert consultants to do a thorough review before you sell. Identifying and fixing issues early will save headaches later and make your business more appealing​​.

8. Review and Update Legal Contracts

Budget considerations: Make sure you’ve budgeted for a thorough review of your most important legal documents, like contracts, intellectual property, and regulatory compliance filings. Getting these right is critical before a sale.

Actions:

1. Hire legal advisors to check all your contracts with customers, suppliers, and partners. Make sure everything is solid and won’t cause issues for potential buyers.
2. Plan for legal hiccups: be prepared to deal with any legal disputes or renegotiate contracts that might turn off buyers​​.

9. Market and Position Your Business for the Sale

Budget considerations: Plan to invest in marketing and branding to make your business stand out to buyers. Effective positioning can significantly boost your appeal and, ultimately, your sale price.

Actions:

1. Create or update marketing materials, including a compelling company profile, financial highlights, and market positioning statements.
2. Hire marketing experts to develop polished sales pitches, teasers, or presentations that showcase your business’s strengths, if you don’t have the talent in-house.
3. Allocate enough budget for these efforts, as first impressions in M&A are crucial​​.

10. Plan Your Exit Strategy and Post-Sale Goals

Budget considerations: Set aside budget for planning your exit, including what kind of buyers you might attract (strategic vs. financial) and your post-sale plans—whether you’re aiming for a full exit, partial exit, or something like earnouts. You have a lot more exit options than you might expect.

Actions:

1. Budget for help from M&A advisors to explore different exit strategies and scenarios.
2. Factor in the time and effort your management team will need to position the business for a smooth and successful exit, no matter the type of buyer​​.

11. Prepare for Post-Sale Integration Costs (If Relevant)

Budget considerations: If you’ll be helping with the transition after the sale, make sure to budget for integration costs. This could include your time, staff involvement, or necessary software.

Actions:

1. Allocate funds for: consulting services, extra staff hours, and tools needed to support the buyer post-sale.
2. Plan for potential earnouts or deferred payments tied to post-sale performance, which could impact your financial planning.

By taking the time to integrate M&A pre-sale planning into your budget, you’re setting your company up for a more efficient sale and maximizing its value — rather than risk failing to sell your company altogether.

A well-prepared business not only attracts more buyers but also commands better offers, ensuring a smoother transition and a more successful outcome. At Merit, we’re here to guide you every step of the way.

To find out more about laying the groundwork for an optimal exit down the road,  book a call with a senior professional at Merit. Our team is made up of experienced investment bankers and advisors who not only know the ins and outs of financial markets but also genuinely understand and care about the entrepreneurs and business owners we work with.