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Hey {{first_name}} 👋

I hope you’re having a great week! In the last issue we covered startup exit strategy. Today we go one step further, into what actually happens once a buyer shows up.

Let’s talk about ⬇️

A product leader at a bigger company reaches out. They love what you’re building. They’d like to explore a partnership, maybe an integration.

Three calls later they’ve seen your ARR, your retention, your roadmap, and your top customers.

You still don’t know their timeline, their budget, or who actually makes the decision.

Sometimes that conversation turns into an acquisition. Sometimes it was always research. Acquirers use partnership framing on purpose, because it lowers your guard while they learn where your soft spots are.

Either way, here’s the uncomfortable part. By the time that email arrives, your price is already half decided. It was set by whether your financials, unit economics, and forecast can survive someone outside the company trying to break them.

I’m exploring what AI should actually do for finance teams. Not demos. The real work that eats your week.

Tell me where your time goes and what you’d hand off tomorrow. Everyone who answers gets the full results.

Signs it’s serious:

Signs you’re the research project:

If you can’t tell which one you’re in, slow down. Get your board involved, get your own numbers straight first, and talk to an M&A attorney before sharing anything beyond public information.

Your leverage is highest right now, before they’ve mapped your weak spots.

Once a buyer is seriously engaged, the formal process usually runs 6 to 9 months. Outreach and NDAs, indication of interest, management presentations, LOI, confirmatory diligence, purchase agreement, close.

The part nobody sees is the 18 to 24 months of prep before that. Cap table cleanup, IP assignments, revenue recognition, a model that holds up. That work decides whether the formal process is clean or ugly.

Two moments matter more than the rest.

The LOI. Most come with an exclusivity window, commonly 60 to 90 days. During it you can’t talk to anyone else. Your negotiating position drops faster here than anywhere else in the process, so whatever you lock into the LOI is close to final. Resolve the economic terms before signing, beyond the headline price.

Diligence. This is where 30 to 40% of deals die or get re-traded.

Axial’s Dead Deal Report put numbers on it for 2025. The top causes of broken LOIs were non-QoE diligence findings at 25.3% and quality of earnings discrepancies at 21.3%. Together, nearly half of all post-LOI failures.

Deals with at least one re-trade took about two months longer to close.

Almost none of that is the buyer changing their mind. It’s information that was undisclosed, inconsistent, or never assembled.

The slide: ARR, $18.4M.

The CRM that week: $19.1M.

The finance system: $17.6M.

All three were defensible. The CRM counted signed contracts not yet live. Finance excluded a usage-based component. The deck split the difference using a definition nobody had written down.

Inside the company, everyone knew roughly why. A buyer’s diligence team won’t. They’ll find three numbers for one metric and price in the possibility that something else is off too.

The fix: one written definition per metric. ARR, NRR, CAC. Same definition in the deck, the CRM, and the finance system, with the document sitting in the data room.

Valuation is a formula buyers run. Three inputs dominate it.

Private SaaS multiples in 2026 run from roughly 3x to 12x ARR depending on those three.

The spread is the story. Two companies at the same ARR can close 3x apart, and the difference is rarely the product.

McKinsey’s numbers make the same point. Top-quartile SaaS companies on Rule of 40 earn nearly three times the EV/Revenue multiples of bottom-quartile peers. On retention specifically, top-quartile NRR companies traded at a median 24x EV/Revenue against 5x for the bottom quartile.

Four steps. Do them before any acquisition conversation.

1. Trailing 12-month ARR growth. Ending ARR, not bookings. Exclude one-time services. Be explicit about usage-based revenue.

2. Cohort NRR. Revenue from customers who existed 12 months ago, compared to what they pay now, including expansion, contraction, and churn. A blended number hides which cohorts are actually expanding.

3. Rule of 40 on an accrual basis. YoY revenue growth plus EBITDA margin, or FCF margin if that’s the more honest number for your business. Use accrual, because that’s what the buyer’s QoE firm will rebuild anyway.

4. Place yourself honestly. Find the row you’re actually in, which may differ from the one your board deck implies.

You don’t need a banker for any of this.

Reconcile metric definitions everywhere. See the board deck segment above. Inconsistency is the easiest justification for a lower offer.

Move to accrual if you haven’t. A QoE review normalizes reported earnings for sustainability, and the adjustments can materially change the EBITDA your deal is priced on. Doing the conversion yourself first means you control the story.

Build a 12 to 18 month cash and runway forecast as a range. Explicit assumptions on churn, expansion, hiring, and pricing. A single point projection reads like a pitch.

Check customer contracts for change-of-control clauses. Your top customers may have them. Find out before the buyer does.

Get the founder’s knowledge out of the founder’s head. If every answer on churn, pipeline, or margin lives with one person, buyers price in owner-dependency risk. Name owners, document the recurring explanations.

Clean the cap table. Fully diluted, current, reconciled to grants and board minutes. Missed consents and incomplete IP assignments kill deals regularly, and both are easy to fix with time.

On the one-buyer point specifically: competitive tension is the most reliable lever on both price and terms. No serious acquirer wants to lose a deal they’ve already spent time on.

Run it this quarter, whether or not a sale is on the table.

More than two unchecked means circumstances are setting your exit timeline. Start 18-24 months before you want the option. Concentration fixes and the cash-to-accrual switch alone take multiple quarters.

The acquisition process rewards the same discipline good FP&A rewards every month. Consistent definitions. A forecast built on stated assumptions. Numbers that hold up when someone tries to break them.

Price, terms, and speed to close all come downstream of that.

When a deal stalls at $5-50M ARR, the problem usually isn’t the banker or the lawyer. It’s a forecasting and decision-quality gap that was already there. Diligence is just the first time someone with leverage over the price gets to see it.

If you’re the finance lead, the definitions document and the range-based forecast are the two things worth building this quarter. Both pay off whether or not a buyer ever calls.

Reply “ACQUIRE” and I’ll send the acquisition readiness gate as a working checklist, plus the metric definitions template you can drop straight into a data room.

Back from a week of travel and the espresso machine had clearly missed me.

Buying finance software usually means weeks of demos and sales calls. FATE puts 100+ vendors on one floor for two days, so you can compare them side by side.

November 18–19 at the Javits Center, New York.

I’ll be there too. Reply if you’re coming and we’ll grab a coffee.

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