Seven Things Buyers Look For in Your Accounts

"The business did £850k EBITDA last year."

That's how most seller conversations open. And in our experience, the number that ends up in a Sale and Purchase Agreement often looks very different from the number first quoted.

It isn't that owners are being dishonest. It's that they've rarely looked at their own accounts through a buyer's eyes.

Here's what trade and private equity buyers are actually doing when your accountant sends over three years of management information.

1. Normalising EBITDA.

Owner salary. Spouse salary (if not working in the business). The company car. The corporate box. The family holiday booked through the business. All of it gets stripped out or added back. The resulting figure is rarely the number on the face of the P&L.

2. Customer concentration.

If one customer accounts for 40%+ of revenue, the multiple drops — sometimes materially. Good businesses get walked away from because a single contract loss would halve EBITDA overnight.

3. Gross margin trend, not just the headline.

A flat gross margin on rising revenue is healthy. A compressing gross margin signals either eroding pricing power or input costs that can't be passed on. Both are red flags during diligence.

4. Working capital movement.

If debtor days have stretched from 45 to 75 over three years, either customers are squeezing the business or credit control has slipped. Either interpretation affects what a buyer will fund on day one.

5. Capex versus depreciation.

If the depreciation charge is materially higher than recent capex, the business is running on tired equipment and someone is going to have to write a significant cheque soon. That someone often becomes the buyer — which comes directly off the price.

6. Stock valuation.

Old, slow-moving, or obsolete stock sitting on the balance sheet at full cost is almost universal in engineering businesses. A buyer will want a stock count and an aged analysis. Anything that can't be justified comes off the completion accounts.

7. What isn't in the accounts at all.

Key-person dependency. Verbal agreements with major customers. An ageing workforce with no succession plan. A lease up for renewal in 18 months. None of this appears in the P&L, but all of it shapes the offer more than the EBITDA figure does.

The takeaway.

For owners two or three years away from exit, the work to address these issues is modest. For those six months from market without having considered any of them, value will be left on the table — guaranteed.

We've seen owner-managers genuinely surprised when headline offers land 15–20% below expectation. In almost every case, the gap wasn't the buyer being opportunistic. It was the seller not seeing what the buyer was seeing.

The goal is to get the accounts match-fit before going to market. Not after.