6 min read · 761 words
At a glance
- A deal re-trades when a buyer’s analyst finds something in the numbers he can’t reconcile. Every finding after that gets read with suspicion, and suspicion is priced against the seller.
- The findings that cause it are predictable, and there are about five of them. Every one is a seller-side problem the seller can clear before a buyer ever opens the data room.
- Found early, they’re housekeeping. Found in diligence, they hand the buyer a discount the seller has almost no room to refuse.
If you run deals or you’re about to sell one, the fastest way to protect the price is to know exactly what re-trades it. This piece names the five findings a buyer’s analyst reliably surfaces, in the order he tends to find them, and why the seller controls every one.
Why do deals re-trade in diligence and not in negotiation?
Because negotiation sets a price on a story, and diligence is where the buyer tests whether the story is true. The agreed number is really an option the buyer holds until the data confirms it. The moment the data doesn’t, he re-prices, and he does it when the seller has the least room to push back: momentum is up, the team knows, the family knows, and the buyer knows all of it.
The trigger is almost never fraud. It’s that the seller’s numbers were built to record the past, not to survive a stranger proving the future. The gap doesn’t show until a trained analyst goes looking, and by then it’s the buyer’s advantage.
What are the five findings?
In the order they usually surface:
- A margin that moves when you look closely. Gross margin that swings month to month, or a blended figure that falls apart when split by product or customer, tells a buyer the earnings aren’t understood. He discounts what isn’t understood.
- Revenue recognized inconsistently. The same kind of sale booked one way early in the year and another way later. Every dollar can be real and the top line still becomes untrustworthy, because the trend rests on a policy that changed.
- Add-backs that don’t survive. A padded schedule of adjustments, half of which get struck on sight. Each strike lowers the number and lowers trust in the rest.
- Cash and revenue that don’t tie out. Money received and never matched to its purpose, or working capital that can’t be reconstructed, forces the buyer to assume the worst and price it in.
- A company that can’t run without the owner. When every pricing, hiring, and customer decision routes through one person, the buyer re-rates the risk and the multiple, because he’s buying dependence, not a system.
Read them together and the pattern is clear: each is a place where the numbers can’t answer a basic question a buyer will ask, and each answer he can’t get becomes a discount.
Who actually controls the outcome?
The seller, and earlier than anyone treats it. Every one of the five can be cleared before a buyer is in the room: the costing corrected so margin tells the truth, the revenue policy made consistent and documented, the add-back schedule built to a standard a buyer will accept, the cash reconciled, and the owner pulled far enough out of the decisions that the business reads as an asset.
The catch is timing. This is trailing-track-record work, so clearing the findings the same quarter you go to market documents that the problems were recent rather than removing them from the trend. The sellers who clear diligence cleanly did the work a year or more ahead, before a buyer was applying pressure. Believable numbers protect the multiple from diligence discounts, but only if they’re believable before the buyer looks.
Where this leads
Each finding has its own fix: add-backs a buyer will believe versus strike, owner-dependence and the discount it carries, and sell-side QoE prep, what the seller controls. Underneath them is the diagnosis: books built to record, not to decide.
The Sellable-Numbers Scan runs the buyer’s read on your side first, in dollars, and clears the findings while there’s still time. For owners, the guarantee is simple: at least 3x the Scan fee in owner-accepted value identified, or you pay nothing.
If you’re an owner, book a fit call. If you run deals and want to protect a specific one, book the same call and tell us the deal. Thirty minutes, no pitch either way.
Russell Fette · Decisive Finance · Creator of Financial Rhythms™