The 18-Month M&A Readiness Plan: What Acquirers Look for in Your Financials

Strong revenue alone does not tell the full story in an acquisition. Buyers evaluate the behavior of your financials in detail, rather than relying solely on summary numbers.

Bain’s 2024 M&A analysis shows that acquirers are spending more time on pre-deal diligence and integration planning. Their priority is consistency. They want to see that financial performance, cash flow, and controls will remain stable after ownership changes.

M&A or Mergers and Acquisitions readiness reflects this reality. It is the ability of your financials to support extended diligence, informed negotiations, and realistic integration planning. This capability takes time to develop, which is why serious acquirers evaluate readiness well before a transaction begins.

What M&A Readiness means

M&A readiness describes how well a business can withstand sustained buyer scrutiny, financially, operationally, and structurally. It is not a checklist exercise, and it is not limited to having updated financial statements. From an acquirer’s perspective, readiness addresses a more focused but essential question: Can this business be evaluated, priced, and integrated with a reasonable level of confidence?

In practice, acquirers use financials to test three things. 

• First, whether historical performance is reliable and internally consistent. 

• Second, whether future performance can be assessed using reasonable assumptions. 

• Third, whether risks, financial, tax, or compliance-related are identifiable and measurable. 

A company may perform well operationally and still fail on one or more of these dimensions.

Why Acquirers Expect M&A Readiness?

Acquirers expect M&A readiness, because deal volume and competition increased again in India during 2024. PwC India reported growth in both deal count and disclosed deal value compared to 2023. As transactions increase, buyers have less tolerance for uncertainty in financials.

Most acquirers have already dealt with transactions where financial issues surfaced late. Common examples include unresolved tax exposures, weak working capital controls, or numbers that change once diligence starts. These issues slow decisions, complicate approvals, and weaken confidence in the business.

Because of that experience, buyers now push these checks earlier.

They look at readiness to answer a few basic questions:

• Can the financials be relied on without repeated clarification?

• Do historical numbers align with how the business actually operates?

• Are risks identifiable before negotiations begin?

Unclear solutions lead to slower processes and adjusted terms.

The 18-Month M&A Readiness Plan: How Acquirers Evaluate Your Financials Over Time

Sale preparation occurs in multiple steps. Buyers assess your financials through layered reviews, focusing on clarity, consistency, and predictability. An 18-month planning timeline will provide sufficient time to mitigate risks, improve reporting, and paint a justifiable picture.

Months 1–3 — Diagnostics & Financial Cleanup

In the initial three months, it is all about building credibility and overcoming any deal-breakers for the deal before it is even formally started. At this point, it is mainly about checking if there is any consistency in the financials, nothing related to its strategy.

The major steps in this stage are:

• Prepare three years of audited financials and a reconciled management P&L. Buyers expect alignment between statutory filings and management accounts. Any discrepancies can immediately raise doubts about financial reliability.

• Separate promoter and related-party transactions. Clear documentation of related-party expenses is critical. Undocumented or unclear transactions are a common concern in Indian mid-market deals and can slow diligence.

• Identify and normalize one-time or discretionary items. Adjust figures for non-recurring costs or unusual income, such as one-off marketing campaigns or exceptional gains, to give buyers a realistic view of recurring performance.

• Reconcile cash and bank statements. Unresolved or unexplained cash balances are a deal killer. Accurate cash reconciliation signals financial control and reduces early buyer concerns.

By the end of this phase, your financials should present a consistent, verifiable picture, setting the foundation for the next stage, where buyers start looking at performance projections and operational metrics.

Months 4–6 — KPI & Forecast Framework

By the fourth month, buyers begin looking beyond past performance. They want to see how your business moves forward and whether the numbers can be predicted reliably. This phase is about building forward visibility through defensible KPIs and forecasts.

Key actions and considerations:

• Define KPIs tied to revenue quality and cash conversion. Buyers assess metrics differently depending on your sector:

• Services: billings, accounts receivable (AR) days, customer churn

• Manufacturing: inventory turns, order backlog, production efficiency

These indicators show whether growth is sustainable and whether cash will flow predictably. 

• Develop assumption-driven forecasts. Forecasts must link directly to operational levers. For example, increasing revenue shouldn’t be based on arbitrary optimism, it should be tied to realistic changes in pricing, customer acquisition, or production capacity.

Include sensitivity tables to show how outcomes vary with different assumptions. This allows buyers to see which variables matter most and how resilient your projections are. 

• Account for Indian working capital nuances. Forecasts often underestimate the impact of:

• Receivables cycles, which can stretch beyond projected timelines

• GST refund delays that affect cash flow

Ignoring these factors can make even accurate forecasts seem unreliable.

Months 7–9 — Risk, Tax & Compliance Fixes

Indian M&A transactions can stall or lose value if tax, regulatory, or compliance risks are identified late. Addressing these issues now protects valuation and builds buyer confidence.

Key areas to focus on:

• Indirect tax exposures. GST and other historical indirect tax liabilities can be significant. Some advisory reports estimate meaningful ranges of potential liability during diligence. Buyers look closely at GST compliance and past filings, especially in businesses with high turnover or complex supply chains.

• Direct tax issues. Common items include:

• Minimum Alternate Tax (MAT) credits

• Carryforward losses

• Disputed tax positions

These items often reduce deal value or require indemnities. Buyers want clarity on these positions before proceeding.

• Regulatory approvals and sector licenses. Certain sectors require pre-approvals or licenses that can delay closing. For cross-border deals, RBI and FEMA approvals are critical. Missing or incomplete approvals can extend timelines or even halt a transaction.

By addressing these risks now, you reduce the likelihood of valuation haircuts, extended negotiations, or deal fatigue. A clear record of tax, regulatory, and compliance remediation demonstrates operational maturity and reassures buyers that the business can perform reliably after the acquisition.

Months 10–12 — Financial Storytelling & Data Room Setup

By months 10–12, buyers expect a cohesive financial narrative and a well-organized data room. At this stage, the goal is not to market the business, but to preempt questions and demonstrate operational transparency.

Key priorities for this phase:

• Set up a structured virtual data room (VDR). A well-indexed VDR reduces buyer queries and can shorten the diligence timeline. Include all essential documents, organized logically, so buyers can find what they need without repeated requests. 

• Craft a financial story linking past performance to future value. Buyers want answers to two critical questions:

• Why did the business grow historically?

• Why is this growth sustainable going forward?

• Tie financial metrics, KPIs, and operational drivers together to show a clear line from historical results to projected performance.

• Include supporting documents that reinforce the story. Examples include:

• Audited financial statements and reconciled management P&L

• Quality of Earnings (QoE) reports

• Tax memos and litigation registers

• Customer contracts and top-client aging reports

• Capex and IP schedules

Months 13–15 — Mock Diligence & Refinement

This phase tests your financials and management under real buyer scrutiny. The goal is to eliminate surprises and refine responses.

Key actions during this phase:

• Conduct mock diligence. Simulate QoE, legal, and commercial reviews to uncover gaps early. 

• Test management under time pressure. Run 30–60 day diligence simulations and maintain a ready FAQ pack.

• Refine forecasts and disclosures. Adjust assumptions, KPIs, and explanations based on findings.

By the end of this stage, your team is prepared, and your financials are defensible—reducing risk and building buyer confidence.

Months 16–18 — Buyer Targeting & Negotiation Preparation

In the final phase, the focus shifts to aligning your financial story with buyer priorities and preparing to defend numbers during negotiation. Different buyer types value different aspects of your business.

Your financial packaging affects deal terms such as:

• Representations & warranties

• Purchase price adjustments

• Escrow or indemnity arrangements

• Earn-outs

Understanding these levers helps anticipate buyer requests and structure the deal more favorably. 

Indian buyers increasingly value proof of strong governance, including independent directors and audited internal controls. This is particularly important for PE (Private Equity) and cross-border buyers assessing integration risk.

By the end of this phase, your financials are not only defensible but also tailored to the acquirer’s priorities, improving negotiating position and smoothing the path to closing.

Conclusion

M&A readiness is a strategic, staged process that influences valuation, buyer confidence, and the pace of deal closure. From early financial cleanup to buyer-targeted negotiations, each phase of the 18-month plan builds credibility and predictability, which are the attributes buyers increasingly demand in Indian transactions.

This is where CFO Bridge stands out as an M&A partner. We specialize in preparing businesses for acquisition, guiding them through every stage of financial readiness:

• Reconciling historical financials and separating related-party transactions

• Designing KPIs and forecasts that are defensible under scrutiny

• Mitigating tax, compliance, and regulatory risks specific to the Indian market

• Tailoring financial storytelling to strategic, PE, and cross-border buyers

Our approach ensures that your financials not only withstand scrutiny but actively strengthen your negotiation position. CFOBridge combines deep M&A expertise with hands-on financial advisory, giving acquirers the confidence they need while maximizing value for business owners.

Next step: Connect with our experts today to assess your M&A readiness and create a tailored 18-month plan that positions your business for a smooth, high-value exit.