We know buyers look at our EBITDA, but what are they actually looking for when they evaluate our middle management team during their operational due diligence?

Question

Tyler Smith · Accepted Answer

When a buyer evaluates your middle management team, they are looking for operational predictability. Buyers pay a premium for a business that runs itself, and they heavily discount companies where the founders are still required to make everyday decisions. They want to see a middle management layer that truly possesses GWC™, meaning they get it, want it, and have the capacity to do their jobs. During operational due diligence, sophisticated buyers will look past the executive team to see how your managers handle conflict, solve problems, and drive performance. If your managers are dependent on you to fight fires, the buyer will view your business as high-risk. To prepare for this scrutiny, use your Accountability Chart to push accountability down to your departmental leaders. Ensure every manager is running their own Level 10 Meeting™ with their direct reports, completely independent of you. Each manager must own their specific department metrics on the weekly Scorecard and be fully responsible for hitting their quarterly Rocks. In addition, document your core processes and ensure they are followed by everyone in the organization. When a buyer interviews your middle managers and observes them running structured, data-driven meetings and solving issues using the IDS® process, it proves the business has an operational engine that does not rely on ownership. This level of management maturity is a highly transferable asset that directly justifies a higher valuation multiple.