The M and A capability of the finance function increasingly decides valuation at exit. Not just the numbers being sold. The team behind them.
In the last three exits we have supported on the CFO side, the buyer's diligence team gave direct feedback in the closing week. In each case they cited finance-team quality as a specific factor in their bid confidence.
What "M and A capability" actually means
Not headcount. Not technical expertise in accounting standards.
Three specific things buyers assess in the diligence phase, whether they name them or not.
Response time. How fast can the finance team turn around a diligence question. Hours, days, or weeks. Buyers pattern-match early. A finance team that responds in hours signals a well-run function. A finance team that responds in days signals a function that is stretched.
CFO fluency. How comfortable is the CFO walking a buyer through model assumptions without checking with anyone else. Not just numbers, assumptions. The CFO who can name the seven inputs that most affect the forecast and explain each one from memory reads very differently to the CFO who needs to come back with the answer.
Second-tier visibility. Is the second layer of the finance function visibly capable of running the function if the CFO stepped out. Buyers care about this because it directly affects post-close integration risk. A CFO who is the only person who understands the numbers is a valuation discount.
What the pattern looks like in real deals
Deal one: £120m PE-backed services group. Buyer diligence team requested a specific working-capital analysis on a Thursday afternoon. The finance team returned it by Friday morning. The buyer's operating partner told the seller informally: "We are not adjusting the working capital assumption because your team clearly has this covered." Valuation held.
Deal two: £75m consumer brand. Buyer sent 40 diligence questions in a single tranche. Finance team returned answers to 38 of them within four working days. The remaining two required legal input and were handled separately. Buyer's team told us later that speed of response accelerated their internal decision by two weeks.
Deal three: £60m tech business. CFO was walking the buyer through the forecast model in a live diligence session and needed to check three separate assumptions with team members. Buyer noticed. Their subsequent revised offer priced in additional integration risk. The CFO's inability to hold the numbers under real-time scrutiny cost the seller measurably.
What buyers are actually assessing
Two things, one of which is rarely discussed openly.
The stated assessment is about the numbers being sold. Are they accurate, are the forecasts credible, do the historic figures reconcile.
The unstated assessment is about post-close risk. If the buyer completes this deal, how much finance-function work will they have to do in the first 90 days to make the acquired business investible. That unstated assessment is largely a function of the CFO and the second layer.
Buyers rarely say this out loud. They express it in the valuation.
What sellers can do about it
Two things, both requiring lead time.
Build the second layer 12 months before the exit process starts. A Group Financial Controller or Head of FP and A hired specifically for exit readiness pays back many times over during diligence. Buyers see the depth and price accordingly.
Rehearse the diligence flow before the buyer engages. Have the CFO walk an independent finance advisor through the forecast model as if it were a live diligence session. Any assumption the CFO cannot explain fluently is an assumption the buyer will find. Fix them before the process starts.
Both practices cost meaningfully less than the valuation impact of getting them wrong.
What this means for CFO hiring
If an exit is on the 24-month roadmap, the CFO profile you are hiring against should include specific M and A capability. Not just prior exit experience, though that helps. Specifically: prior diligence-facing experience, prior direct engagement with buyer teams, prior evidence of building a finance function that stood up to buyer scrutiny.
If your current CFO does not have those specifically, either hire a stronger second layer to compensate, or start the CFO conversation.
If you are 12 to 24 months from an exit and want to talk through what the finance function needs to look like at close, get in touch.
