We have been deferring major capital expenditures on our machinery to keep our cash flow high for the sale, but we know the buyer's technical due diligence will flag this. How do we handle our equipment maintenance schedule during our exit runway?

Question

Tyler Smith · Accepted Answer

Deferring capital expenditures to artificially inflate your EBITDA is a short-sighted strategy that backfires during due diligence. Buyers employ forensic engineers and operational experts who will easily spot neglected machinery, outdated software, or deferred facility maintenance. They will simply subtract the cost of those deferred upgrades from your purchase price at close, often with a penalty multiple applied.

The correct approach is to run your business up to the day of sale as if you plan to keep it forever. Maintain a rigorous preventative maintenance schedule and continue to invest in necessary equipment upgrades. Document all capital expenditures and maintenance logs meticulously.

By presenting a clean, up-to-date physical plant and modern technology stack, you remove a major negotiation lever from the buyer. You can easily justify your capital expenditure as an investment that supports future growth and efficiency. This transparent, proactive approach builds trust and prevents the buyer from re-trading the deal. It is far better to sell a well-oiled machine at a premium than a neglected asset that invites heavy price adjustments during the final hours of negotiation.