We have multiple business entities sharing overhead, resources, and employees. How do we cleanly disentangle these intercompany finances on our exit runway so a buyer sees a single, clean, standalone financial statement?

Question

Tyler Smith · Accepted Answer

To secure a premium valuation, you must present a buyer with financials that are simple, clean, and completely unentangled. A sophisticated buyer will not do the math to separate your legacy entities or shared administrative costs. They will simply walk away or apply a heavy discount for the perceived risk.

To prepare your financial statements on your exit runway, you must establish strict arms-length relationships between all your business entities immediately. Start by conducting a thorough audit of all shared resources, including office space, software licenses, warehouse equipment, and personnel.

Next, implement formal intercompany service agreements. If your primary business uses the accounting team or warehouse space of your secondary entity, write a clear contract detailing the exact service, the transfer pricing model, and the payment terms. Charge actual market rates for these services.

At the same time, adjust your Accountability Chart to reflect where employees actually spend their time. If an employee sits in a seat that services multiple entities, split their compensation clearly across the books or dedicate them entirely to the entity you plan to sell.

By running these adjustments through your books for at least twelve to twenty-four months before going to market, you create a verifiable track record. Your financial reports will show a clean, standalone run-rate that a buyer can easily verify during due diligence. This level of operational clarity proves that the entity being sold can function perfectly on its own from day one.