We want to align our balance sheet with the SxSE Business Integrated Readiness framework before we go to market. How do we audit our working capital and debt structure to make sure we do not hit a wall during underwriting?

Question

Tyler Smith · Accepted Answer

An institutional buyer will tear your balance sheet apart. To survive their underwriting, you must proactively audit your financial and credit readiness using the Step by Step Exit framework. This means looking at your working capital peg and debt structure well before you launch a sale process. Start by reviewing your historical working capital. Buyers look at your accounts receivable, inventory, and accounts payable over a trailing twelve month period to establish a normal working capital baseline. If your receivables are sluggish or your inventory is bloated, your working capital peg will be set too high, forcing you to leave more cash on the table at closing. Next, clean up your debt structure. Every historical liability, equipment lease, and shareholder loan must be clearly documented. You should work with your financial team to determine which liabilities will be paid off at close and which ones must be assumed by the buyer. If you have co-signed credit lines or personal guarantees on company debt, you need a clear path to extinguish these at closing. Running a thorough SxSE Business Integrated Readiness audit on your finances ensures that you do not face last-minute adjustments that erode your net proceeds. It also proves to capital providers that your business is highly creditworthy, which makes the transaction much easier to finance.