2025 Business Owner’s Exit Readiness Report

Mid-2025 deal data shows buyers are more selective than ever: closing fewer transactions overall but paying top-tier valuations for companies that clear their readiness bar on day one. That bar isn’t just about strong financial performance; it’s about operational independence, clean and verified reporting, legal and contractual clarity, and a growth story that aligns with a buyer’s strategic goals.

This readiness report is built for lower-middle-market owners who may be one to three years away from an exit, or who simply want to keep their company in a “sale-ready ” state to capture opportunities as they arise. You ’ll see what the numbers say about today ’s market, how valuations are actually set, who the active buyers are, avoidable mistakes that can cost sellers millions, and the practical steps that signal you ’re prepared to transact.

1. What the Numbers Say: 2025 Snapshot

The M&A market in mid-2025 wasn't dormant, but it has been very selective. In the first half of the year global private equity and venture deal value surged nearly 19%, rising from approximately $325.6 billion in H1 2024 to $386.4 billion while the number of deals dropped by about 6% (S&P Global).In the U.S., the number of deals over $100 million slipped by about 5% in Q2 2025 compared to Q1, but the total value of those deals still grew by more than 6%, confirming that serious capital seeks serious assets (EYParthenon).

That means buyers are allocating more dollars, but only to the opportunities that meet their high standards. This shift is being driven by a convergence of factors: improved credit conditions, tighter underwriting standards within investment committees, and a heightened emphasis on disciplined capital deployment across both private equity and strategic acquirers (Dechert). The implication for owners is straightforward — capital is not retreating, it is concentrating.

Premium valuations are still on the table, but they are being directed toward a narrower set of assets that exhibit institutional-grade readiness: audited or QoE-verified financials, scalable and transferable operations, and demonstrable growth catalysts. In this environment, “good” businesses attract interest; “best-in-class” businesses command competition.

What This Means for Owners

For business owners, current market data signals that buyers are active, capital is available, and strong companies can still command premium valuations. However, with fewer total transactions getting done, the market is more selective as buyers focus their time and resources on businesses that are fully prepared for a sale.

Deal-ready businesses share a few common traits: clean, accrual-based financials validated by a recent Quality of Earnings review; current, well-organized customer and supplier contracts; properly documented intellectual property; and retention agreements for key employees. These measures reduce diligence risk, safeguard valuation, and limit opportunities for buyers to introduce last-minute price adjustments or delays.

2. Who’s Buying and What They Want

In 2025, the U.S. lower-middle market is defined by three primary buyer groups: private equity firms, strategic buyers, and family offices. Each plays a distinct role in deal activity and competes differently for well-prepared companies.

Private equity remains the dominant force in this segment. Firms are actively seeking both new platform acquisitions and add-ons to grow existing portfolio companies. Globally, private equity “dry powder”—investor capital committed but not yet deployed—reached approximately $2.62 trillion as of mid-2024 (Moonfare). Buyout funds now control around $1.2 trillion, with nearly 24% of that capital having been on the sidelines for four years or more, which puts firms under pressure to close transactions before fund investment periods expire (Bain & Company). For sellers, this capital overhang can translate into more competitive bidding and faster deal timelines, provided the business is fully “buyer ready.”

Strategic buyers, or operating companies acquiring other businesses—tend to have different motivations. Their acquisitions are often driven by the pursuit of synergies, entry into new markets, vertical integration, or competitive positioning. Because strategics may fund deals from corporate balance sheets or existing credit facilities, they can act quickly when a target fits their strategic plan. This agility, combined with their willingness to pay a premium for a target that delivers complementary products, geographic expansion, or cost savings, means well-positioned companies can see valuations that exceed typical market multiples.

Family offices, while smaller in total deal volume, are playing a steadily growing role in the lower-middle market. These private investment entities for high-net-worth families often bring patient capital and a willingness to hold businesses for longer periods than traditional private equity (Axial). For owners prioritizing legacy alongside liquidity, family offices can offer flexible deal structures and long-term stewardship that align with non-financial goals.

Across all three buyer types, one reality is clear in 2025: there is no shortage of capital, but there is a shortage of qualified opportunities. Buyers are prepared to pay for certainty, growth potential, and low transition risk. Unprepared businesses, however, risk being passed over despite record levels of undeployed capital.

3. Start Early, Sell Strong: Timing Your Exit to Maximize Value

When buyers evaluate a potential acquisition, valuation is one of the first filters they apply. They ’ll weigh your financial performance, risk profile, and fit against their target return — often with an eye toward where similar businesses in your space have traded. The more your company aligns with the traits of top-performing peers, the closer you ’ll get to the higher end of that range. But hitting those numbers isn’t just about market conditions — it’s about the runway you give yourself to make measurable improvements before the sale.

In the lower-middle market, the real clock starts long before a Letter of Intent is signed. Premarket preparation can take anywhere from a few weeks to more than a year, depending on how “buyer ready ” the business is. Most sellers fall into one of three profiles.

Fast Track (~90 Days). For owners who already keep their books on accrual accounting, have contracts in order, and can step away from daily operations without disruption, a sale process can start in as little as three months. This is the “ready now ” profile, where preparation focuses on polishing, not rebuilding.

Key Actions:

• Close your books monthly on an accrual basis so buyers can track true performance over time.
• Compile a trailing twelve-month (TTM) income statement with add-backs clearly documented to support your EBITDA story
• Commission a sell-side Quality of Earnings (QoE) review to verify earnings before the buyer does.
• Confirm all business licenses and permits are active to avoid delays during due diligence.
• Verify and document intellectual property ownership—trademarks, patents, copyrights—so rights are clear.
• Organize Standard Operating Procedures (SOPs) for all key processes so operations can run without you.
• Reduce customer concentration risk by diversifying your revenue sources and limiting dependence on a single client.
• Fully document Standard Operating Procedures (SOPs) so key processes can be replicated without your oversight.
• Implement a formal succession plan to show buyers there’s leadership continuity postsale. Identify likely buyer profiles—strategic, private equity, or family office—and begin preliminary outreach planning.
• Draft a Confidential Information Memorandum (CIM) to provide vetted, structured information once serious buyer conversations begin.
• Secure retention agreements with key employees to keep leadership in place through and after the sale.
• Prepare a one-page teaser that highlights your business without revealing its identity, for discreet outreach to qualified buyers.

With these items in place, you can launch a sale process quickly and present yourself as “buyer ready ” from day one. If these fundamentals aren’t in place—especially regarding contracts, financial reporting, or operational handoff—you ’ll need the Standard (6–9 Months) track to close the gaps before going to market.

Standard (~6–9 Months). Most owners fall into this category. Even solid businesses often still have loose ends to tie up before going to market. This track allows time to correct moderate operational, legal, or financial issues so you can present a cleaner, more compelling profile to buyers.

Key Actions:

• Switch from cash to accrual accounting if you haven’t already, so financials reflect actual performance periods.
• Standardize historical financial statements to ensure consistent formatting and reporting across multiple years.
• Renew and, where possible, extend customer and supplier contracts, ideally adding change-of-control clauses for seamless transfer.
• Reduce customer concentration risk by diversifying your revenue sources and limiting dependence on a single client.
• Fully document Standard Operating Procedures (SOPs) so key processes can be replicated without your oversight. Implement a formal succession plan to show buyers there’s leadership continuity postsale.
• Identify likely buyer profiles—strategic, private equity, or family office—and begin preliminary outreach planning.
• Draft a Confidential Information Memorandum (CIM) to provide vetted, structured information once serious buyer conversations begin.

This phase positions you to move confidently into the market without scrambling during diligence. If your goals include materially increasing valuation, rather than just meeting readiness standards, the Value Build (12–18 Months) track offers the longer runway to make that happen.

Value Build (~12–18 Months). This track is for owners who want more than just a clean exit—they want to materially raise the value of the business before approaching buyers. Over a year or more, the focus shifts from readiness to strategic enhancements that can lift multiples and attract a larger, more competitive buyer pool.

Key Actions:

• Improve gross margins through pricing adjustments, cost reduction programs, or supply chain optimization.
• Increase recurring or contracted revenue to strengthen predictability and reduce risk in buyers’ eyes.
• Conduct a full liability audit to uncover—and address—potential deal-breakers early.
• Consult with your CPA to optimize tax efficiency. The sooner your tax professional can help with planning, the better.
• Negotiate long-term customer and supplier contracts, ideally with favorable terms and transfer provisions.
• Diversify suppliers to mitigate operational risk and strengthen resilience.
• Expand into new markets or launch new product lines, with documented results that demonstrate scalability.
• Implement formal KPI tracking systems to measure performance and reinforce operational discipline.
• Raise your public profile through thought leadership, networking, media coverage, and industry recognition.

By the end of this phase, you should be positioned to ehance percieved valuations. With these upgrades in place, the business becomes a premium target in the eyes of both strategic buyers and private equity firms. Whatever your starting point, preparation directly shapes your buyer pool, timeline, and valuation. Businesses with organized, verifiable financials and operational stability tend to attract multiple offers and avoid last-minute renegotiations. Those that skip this groundwork often face extended timelines, lower valuations, or both.

4. Seller Mistakes & Risk Factors (and How to Avoid Them)

Because markets are so selective, avoiding mistakes is just as critical as doing the right things. In the lower-middle market, many deals fall apart or lose significant value because sellers overlook key risks. Below are the most common mistakes, how they tend to show up in real transactions, and what you can do to prevent them.

1. Trying to run the business and the deal at the same time. Selling a business is not a small project. Buyers expect rapid financial updates, site visits, customer calls, management meetings, and more. When owners try to balance handling the sale with daily operations, performance can slip, customers feel neglected, and buyer confidence erodes. The smarter move is to appoint a dedicated “deal quarterback” or hire an external advisor so you can keep the business running at full strength.
2. Misjudging your valuation. Owners often overestimate value based on anecdotal sales or public-company multiples. In reality, private lower-middle-market valuations depend on factors like contract quality, sector dynamics, and concentration risks. Overpricing can repel serious buyers before they even engage.
3. Poor organization of documents and slow data sharing. If you can’t produce signed contracts, tax returns, or inventory reports quickly, buyers may see operational risk and move on. Preparing a secure data room with all documentation ready allows you to keep diligence on track.
4. Neglecting due diligence on prospective buyers. Not every NDA signatory is a viable buyer. Some are “tire kickers” or lack committed capital. Granting exclusivity to an unqualified buyer can lock you out of better opportunities for months. Always confirm funding sources, review deal history, and verify decision-making authority before exclusivity.
5. Underestimating the deal’s time and mental toll. Even smooth deals require several hours per week from the seller over several months. Fatigue can lead to rushed concessions on price or structure. Pace the process, resolve major issues early, and take deliberate breaks to keep a clear head.
6. Failing to maintain performance post-LOI. Purchase price is usually based on recent performance. If revenue dips after signing an LOI, buyers may seek a price cut or walk. Maintain or exceed your targets through closing to protect your leverage.
7. Applying emotional biases to offers. Some sellers reject offers from competitors or “outsiders” based on loyalty or legacy concerns, without weighing terms objectively. While cultural fit matters, narrowing the field too soon can reduce your negotiating power. Evaluate each offer against your defined financial and strategic goals before deciding.
8. Overlooking state and local tax (SALT) liabilities. Companies with multi-state operations may have untracked tax obligations. If buyers find these during diligence, they may demand price reductions or escrowed funds. A SALT exposure review before going to market prevents this surprise.

What all of these mistakes have in common is that they are preventable. In a market where there’s more capital than quality deal flow, eliminating these risks before going to market directly improves your valuation, speeds execution, and increases your negotiating strength.

5. Exit Readiness Signals Buyers Can See

Private equity firms don’t always wait on private documents to begin assessing readiness. Instead, they look for publicly observable indicators—tangible moves across media, filings, and public records that could indicate an owner is making the mental transition into seller mode. Private equity knows to look for the following flags:

1. Leadership Visibility When second-tier leaders appear in press releases, at conferences, or on LinkedIn—not just the CEO—it signals operational depth and succession readiness. Buyers interpret this as reduced dependence on any single individual.

2. Public Contract Wins & Partnerships Announcements about multi-year deals, “exclusive partnerships, ” or significant renewals suggest sustained revenue and strategic alignment. These statements are visible via news channels and official communications.

3. Operational Scalability & Expansion Public disclosures about facility upgrades, technology investments, or new market launches can indicate growth orientation. These are often published through company statements or trade media.

4. Strategic Hires & Board Visibility Public-facing involvement in M&A panels, industry summits, or hiring of strategic advisors (especially in finance, compliance, or operations roles) suggests strategic direction aligned with an exit timeline. These updates appear on LinkedIn, event agendas, and company announcements.

Bottom Line: These external signals serve as proxies when internal financial details aren't publicly available. A business that systematically shares executive visibility, contract progress, scaling initiatives, legal readiness, and strategic hires is effectively preparing the market—without explicitly being “for sale. ” For private owners, precisely timing the release of these signals ensures they attract the right buyer attention at the right time.

Conclusion

The mid-2025 M&A environment is a market of choice, not chance. Buyers are doing fewer deals, but they are writing bigger checks for the right opportunities. That “right” is defined by more than financial performance alone: it’s a blend of operational independence, clean and verified financial reporting, legal and contractual clarity, and a clear strategic fit for the acquirer.

For owners considering a sale in the next 6–24 months, the roadmap is straightforward: eliminate avoidable deal-killers, build a readiness profile that sends strong “in-play ” signals to the market, and match your preparation timeline to your valuation goals. In a selective market, you don’t compete against every other business—you compete against the few that are truly prepared. The better you prepare now, the more leverage you ’ll have when the right buyer is ready to move.