What do Private Equity Backed Businesses Need to Know Before They Ever List
The exit process does not start when a banker is hired. It starts the day a buyer opens the data room and asks whether the numbers hold up. Here is what recent deal data says about why that moment goes wrong so often.
Most finance leaders assume exit readiness is something to think about closer to the exit. The data suggests that is exactly backwards, and that businesses which wait are increasingly the ones watching deals collapse at the final hurdle.
According to Axial’s 2025 Dead Deal Report, which analysed 75 unsuccessful transactions, 46.6% of collapsed letters of intent died because of what diligence uncovered, up sharply from 36.9% the year before. Within that figure, discrepancies in quality of earnings and EBITDA accounted for 21.3% of broken deals on their own. To put that in perspective, at a typical 5x valuation multiple, a $400,000 correction to EBITDA can remove $2 million of enterprise value in a single conversation. One case in the report showed EBITDA overstated by 25% once diligence was complete.
Deals are dying over data
The shift in why deals fail is as telling as the failure rate itself. The same report found that financing related failures fell from 21.3% of broken deals in 2023 to 10.7% in 2025. Capital is not the obstacle it once was. Financial credibility is. Buyers are not walking away because they cannot find the money. They are walking away because they no longer trust the numbers they were shown.
This should reframe how any finance leader thinks about exit preparation. The risk is rarely that a buyer cannot be found. It is that the numbers presented early in a process do not survive contact with a buyer’s own advisers, and once trust breaks down in one area of the data room, every other number gets scrutinised harder as a result.
The market context making this more likely, not less
This is happening against a backdrop of extended holding periods and more selective buyers. Grant Thornton’s Private Equity Pulse 2026 found that 52% of UK private equity firms now expect longer portfolio holding periods than in previous cycles. Longer holds mean more time for a business to change, for its systems to fragment further, and for the story told to investors on day one to drift from what the numbers show by the time an exit is finally considered.
Shoosmiths’ UK private equity update for the first half of 2026 adds a further layer to this. Buyers are increasingly evaluating whether a portfolio company’s original investment thesis has actually been delivered before a formal sale process even begins. In practical terms, the informal diligence now starts long before anyone signs an engagement letter with a bank, which means the finance function is being tested well before anyone in the business has been told an exit is underway.
Why exit readiness cannot be a year four project
The instinct to treat exit preparation as something to tidy up close to a sale is understandable, but it consistently backfires. Reworking historical numbers, rebuilding reporting structures, or catching up years of inconsistent treatment across entities under time pressure is exactly the environment in which the kind of discrepancies described above tend to surface, because there is no time left to catch them internally before a buyer does.
Advisers working directly on sell side preparation increasingly recommend starting this work far earlier than businesses expect. Guidance cited in recent Thomson Reuters coverage of financial reporting gaps in mid market deals recommends beginning preparation 12 to 24 months before engaging with buyers, precisely so that any inconsistencies can be found and corrected while there is still time to do so calmly, rather than under diligence pressure.
What exit ready finance looks like day to day
Exit readiness is not a separate workstream bolted onto the finance function shortly before a sale. It is simply what good finance discipline looks like when it is applied consistently. It means every entity closes on the same cadence, using the same definitions, with the same level of documentation behind every adjustment, regardless of whether a sale is six months or six years away.
It also means the story told to the board every month is the same story that would be told to a buyer’s advisers, because a business that reports one way internally and prepares to present another way externally is usually the business where diligence finds the gap. The businesses that move through an exit process smoothly are rarely the ones that prepared hardest in the final quarter. They are the ones that had nothing left to prepare because the numbers were already clean.
Frequently Asked Questions
Recent advice on sell side preparation recommends starting 12 to 24 months before any buyer conversations begin, giving enough time to identify and correct inconsistencies before they are found during formal diligence.
Data driven issues, including quality of earnings and EBITDA discrepancies, are now the leading cause of collapsed deals, accounting for 46.6% of broken letters of intent in 2025, well ahead of financing related failures.
No. Buyers increasingly assess whether a business delivered on its original investment thesis before a formal process even starts, which means finance discipline needs to be consistent throughout the holding period, not tightened up at the end of it.
FINAL THOUGHT
The businesses that move through an exit smoothly are usually the ones that never had to treat it as a special project. If you want a finance function that is exit ready by default rather than by scramble,
get in touch at [email protected] or visit unisondirect.com/uk.
SOURCES & REFERENCES
- Valutico – Why Deals Fail in Due Diligence: 2026 Data – Valutico, citing Axial’s 2025 Dead Deal Report
- Grant Thornton – Private Equity Pulse 2026
- Shoosmiths – Private equity 2026 half-year update: Resilience & liquidity
- Thomson Reuters – Companies Rush to Market Only to See Deals Falter Over Financial Reporting Gaps
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