Are you thinking about selling or merging your business? In September 2025, the Federal Reserve Bank lowered its benchmark rate by 0.25% and hinted at possible additional rate cuts in the coming months. Lower rates, combined with favorable tax law changes, could spark the merger and acquisition (M&A) market as we head into 2026.
Even if you’re not looking to sell anytime soon, you never know when you might receive an offer that’s too good to refuse from a competitor or private equity firm. Here’s how to maximize your return on investment.
Know your current market value
While reading trade publications or attending business conferences, you might have encountered business valuation rules of thumb, such as five times earnings before interest, taxes, depreciation and amortization (EBITDA) or 1.5 times revenue. But it’s risky to set your asking price based on these simplified formulas. They can sometimes be outdated or inaccurate or omit critical information that could affect a business’s market value.
The key is to evaluate real-world market data. Business valuation professionals have access to databases of thousands of comparable transactions that can be filtered and analyzed to develop relevant pricing multiples to more accurately value your business. Valuation pros can also project your company’s future earnings and then use a discounted cash flow analysis to value it.
Understand value drivers
Knowing what drives value helps you make targeted improvements before you go to market. However, market value is just a starting point. Synergistic expectations — from cost-saving or revenue-boosting opportunities — may entice buyers to pay a premium above market value.
Business owners can also take proactive steps to enhance their company’s perceived value. For example, they might:
- Cut extraneous costs to boost EBITDA,
- Expand into new markets to increase revenue,
- Discontinue unprofitable product or service lines, or
- Divest nonoperating assets that aren’t essential to core business activities.
Some companies may even purchase outstanding stock held by noncontrolling shareholders to simplify the M&A process and reduce the risk that these owners will oppose a future sale.
Dress your business for M&A success
Whether you plan to sell now or later, it pays to be ready when opportunity knocks. Examples of selling features that can help attract buyers include:
Clean financials. Financial statements that comply with U.S. Generally Accepted Accounting Principles convey trust and transparency to potential buyers. However, financials that require significant adjustments may raise a red flag. For example, buyers may be leery of businesses that commingle personal and business assets or that engage in above- or below-market related-party transactions (such as shareholder loans and relatives on the payroll).
Growth potential. Owners nearing retirement can’t afford to rest on their laurels. Buyers are interested in a company’s future potential. Depending on the type of business, selling for top dollar may require a tack-sharp sales team, a pipeline of research and development projects, well-maintained equipment, or a marketing department that’s strategically positioning the company to take advantage of market changes and opportunities. Avoid cutting costs that might impair future growth.
Comprehensive due diligence package. Preparing for a sale is critical. Serious buyers will want more than just financial statements and tax returns to conduct their due diligence. Depending on the industry and level of sophistication, they may ask for marketing collateral, business plans, financial projections, fixed asset registers and inventory listings. Many will even request copies of major contracts, such as leases, insurance policies, franchise deals, employee noncompete agreements and loan documents.
We can help
When preparing your due diligence package, it’s smart to obtain a formal business valuation or a quality of earnings report from a qualified, independent valuation professional. Serious buyers will likely perform their own analyses. So it’s essential to enter negotiations with a clear understanding of your company’s market value, earnings and key value drivers. Contact us to get started. We can provide reports to help justify your asking price, reduce uncertainty and bridge potential valuation gaps.
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