For sponsors, M&A advisors and family offices
The deals that do not close for reporting reasons.
You have passed on companies you liked because the numbers could not be verified in the time available. That is a fixable condition, and it is fixable on a known timeline.
The backlog
Supply is arriving. Verification is not.
Two things are happening at once, and the space between them is where good businesses fail to trade.
US small and mid-sized businesses face an ownership transition by 2035. More than a million are viable candidates for sale.
McKinsey Institute for Economic Mobility, February 2026. The report puts up to five trillion dollars of enterprise value in that group.
Sponsors that once looked only at larger targets are now working below fifty million in revenue, and in some cases below twenty-five.
Reported by Thomson Reuters, April 2026, from interviews with transaction advisers.
Deal advisers have a term for what arrives at the meeting: almost sellable. Enough growth to attract a buyer. Not enough financial and operational discipline to survive diligence without a discount or a broken process. One adviser interviewed on the record put the base rate bluntly: a company that is genuinely transaction ready is the exception rather than the rule.
The constraint on this market is not capital, and it is not appetite. It is verification. Capital is competing for assets it cannot underwrite quickly enough to bid on with confidence.
What actually blocks it
Rarely the business. Usually the evidence.
These are the findings that turn a live process into a renegotiation, and they are consistent enough to be predicted before anyone opens a data room.
- Reporting that cannot answer the profit question Monthly numbers arrive on time and still cannot show which customers, product lines or segments actually drive the profit. This is the most common finding and the one that erodes buyer confidence fastest.
- Periods that are not comparable A change in accounting basis without restating the history, or years of inconsistent treatment, leaves a buyer unable to read the trend they are being asked to pay for.
- Process that lives in the owner's head Undocumented operations mean the answer changes depending on who is asked. It reads as key-person risk and it prices as key-person risk.
- Finance infrastructure behind the business Spreadsheets and entry-level accounting software carrying a company that has outgrown both, so every analysis a buyer requests is assembled by hand under time pressure.
None of that is a performance problem. Every one of them is a proof problem, and proof is buildable.
AI readiness
Two questions a buyer now asks about AI.
Neither of them is about models, and neither has a good answer in most mid-market businesses.
- What did the spend already on the P&L buy? Two or three years of pilots is now a visible line in a lot of businesses. A buyer will ask what came back from it. "We are experimenting" reads very differently on a diligence call than it did in a board meeting.
- Can this business deploy agentic systems at all? Or will it spend the first two years of the hold untangling its data before anything can safely act on it? That is a cost the model has to carry, and it belongs in the price rather than in a surprise eighteen months after close.
An agent does not answer and stop. It plans, reads, decides and acts across several steps, which means a wrong read early contaminates everything after it. When the same customer exists in five systems with five versions of the truth, the chance of that first wrong read is not small. AI readiness is a data question wearing a technology costume.
Which is the same finding as everything above it on this page. A business whose numbers cannot survive a buyer's questions cannot survive an agent's questions either.
is roughly how long mid-market firms have taken to move an AI deployment into production, against about nine months at large enterprises. Fewer systems, a smaller estate, and decisions made by people who are in the room.
Directional finding from MIT Project NANDA, 2025. See the note on that study below.
For a sponsor, that cuts both ways. The portfolio company that has consolidated its data is a genuinely faster place to deploy than a large corporate. The one that has not will spend the hold period getting to the starting line.
Where we come in
Four points in the life of a holding.
-
Pre-acquisition
What the systems and the data actually support, what will not survive a buyer's questions later, and what it will cost to fix after close. Scoped to your diligence clock, not ours.
-
Post-close value creation
The first-100-days operating infrastructure, built so the investment thesis has something to run on and the reporting you need exists before the first board meeting.
-
Sell-side readiness
Getting reporting defensible twelve to twenty-four months before a process starts. Practitioners who run these processes are consistent that this is the window, and that it cannot be compressed once a buyer is at the table.
-
Portfolio-wide
The same operating spine across multiple holdings, so the second one is faster than the first and the reporting means the same thing in every company you own.
On platforms, so you can answer it if you are asked: the assessment assumes nothing and frequently concludes the platform is not the constraint. We have experience across Dynamics and NetSuite, so it is not written by people who only know one answer. What we build and run is Salesforce. A build that belongs elsewhere gets an introduction to a firm that specialises in it, rather than a proposal from us.
A Quality of Earnings report tells a buyer what the business earned. Nothing in it tells them whether the number could be produced again next quarter. That is the part we build.
What a referral costs you
Your name is the thing at risk. We know that.
An introduction from you is worth more than any marketing we could do, and it is worth more precisely because it costs you something if we are wrong. So the first engagement is deliberately small and fixed in scope.
The Alignment Analysis is a fixed-fee diagnostic that names which of four areas is holding the business back, in board-ready form, in under three weeks. There is no sales sequence attached to it. The company you send us gets the findings whether or not they engage us further, which means the worst case for your reputation is that someone you referred received a useful piece of work for a known fee.
If you passed on a company for reporting reasons, that is the conversation we want. Tell us what you could not get comfortable with. Often it is a twelve-month problem, not a permanent one.
Sources
- McKinsey Institute for Economic Mobility, The great ownership transfer, February 2026. Estimates roughly six million US small and mid-sized businesses facing ownership transitions by 2035, with more than one million viable candidates for sale representing up to five trillion dollars in enterprise value. Note that this covers the full small-business population, which is broader than the mid-market we work in.
- Thomson Reuters Checkpoint News, Companies rush to market only to see deals falter over financial reporting gaps, April 2026. Interviews with transaction advisers on the pool of almost-sellable businesses, on private capital moving into smaller targets, and on the twelve-to-twenty-four-month readiness window.
- MIT Project NANDA, The GenAI Divide: State of AI in Business, 2025. We cite one directional finding from it, on time to production by company size. We deliberately do not cite its headline figure, the widely repeated claim that ninety-five per cent of enterprise AI pilots deliver no measurable return. That number rests on 52 organisational interviews, 153 survey responses and self-reported outcomes in a preliminary paper that has not been peer reviewed. It may well be directionally true. It is not something we would ask a client to act on, and we would rather tell you that than borrow the headline.
- BCG, Flipping the odds of digital transformation success, 2020, and McKinsey Global Survey, 2018, cited on our homepage.