Why Working Capital Matters More Than You Think in M&A
When buyers evaluate an acquisition, most of the attention goes to revenue, EBITDA and the multiple. Working capital tends to come up later, often when the lawyers start drafting the price adjustment clause. That is usually too late. In our experience at Hillpine, across more than 100 transactions in India, the UK, Europe, the US, Australia and the Middle East, working capital is one of the most common reasons the price agreed at term sheet stage is not the price that is finally paid. It moves value between buyer and seller, often by more than either side expected. Net working capital is the cash tied up in running the business day to day. In simple terms, it is trade receivables plus inventory, less trade payables, together with other operating items such as prepayments and accruals. How it is defined, measured and agreed in the deal has a direct effect on value. Here is what we look at, and why it matters to both sides of a transaction. 1. Profit Does Not Always Mean Cash A business can report good revenue and EBITDA, but that does not necessarily mean cash is coming in on time. Take a company that has booked strong sales, but whose customers take 90 to 120 days to pay. The revenue is in the profit and loss account, but the cash is sitting in receivables. Meanwhile, salaries, suppliers and rent still have to be paid every month. This can put pressure on cash flow even when the business is profitable. In due diligence, we track days sales outstanding, days inventory outstanding and days payables outstanding month by month, and compare operating cash flow with EBITDA. When profit and cash move in different directions, working capital is usually where the explanation sits. 2. Receivables and Inventory Need a Closer Look Receivables and inventory can take up a significant amount of a company’s cash. Buyers should look at the receivables ageing, not just the total. Rising debtor days can point to collection problems, looser credit terms used to win sales, or disputes with customers. We also check credit notes issued and cash received after the period end. A receivable that is later credited or never collected was never really an asset. Inventory needs the same discipline. Slow-moving or obsolete stock, inventory carried at outdated costs, or a weak year-end count can all overstate the balance. If the business has not provided for these items, working capital, and often EBITDA too, is higher than it should be. These issues may not be immediately obvious from the profit and loss statement. A closer review of working capital helps buyers understand whether the reported current assets are actually useful and recoverable. 3. Agree the Definition Before You Agree the Number The most negotiated part of working capital is often not the number, but what goes into it. Items such as deferred revenue, customer advances, accrued bonuses, income tax payable, overdue supplier balances and related-party balances can sit either in working capital or in net debt. Where they land changes the price. If an item is counted in both, the seller pays for it twice. If it is left out of both, the buyer ends up absorbing it. The definition, the accounting policies used to calculate it and the treatment of each balance sheet line should be set out in the transaction documents, ideally with an illustrative calculation attached. It saves a great deal of argument after closing. 4. How Working Capital Moves the Price Working capital is not just an operational matter. It can also directly affect the financial terms of an acquisition. In most deals, buyer and seller agree a normal level of working capital that the business should be delivered with at closing. This is the working capital peg, or target. The logic is simple. The buyer is paying for a business that can operate normally from day one without needing extra cash. Under a completion accounts mechanism, which is common in the US and India, actual working capital at closing is compared with the peg. If it falls short, the price comes down, usually rupee for rupee or dollar for dollar. If it is higher, the seller receives more. Many deals add a collar or a de minimis threshold so that small differences do not trigger an adjustment. Under a locked box mechanism, which is more typical in the UK and Europe, there is no adjustment after the deal. The price is fixed on a historical balance sheet, so the buyer has to be satisfied that working capital on that date was at a normal level, and that value cannot leak to the seller between the locked box date and completion. Either way, a peg set slightly too low or too high can shift the economics of a deal more than most buyers or sellers expect. It deserves the same scrutiny as the EBITDA multiple. 5. Seasonality and Growth Can Distort the Picture Working capital can change throughout the year, depending on the nature of the business. A retailer builds stock ahead of the holiday season, whether that is Christmas, Diwali or Ramadan. A manufacturer needs more cash in peak production months. An agribusiness may collect most of its cash in the few months after harvest. Looking at working capital on just one date may not give buyers a complete picture. We base the peg on average monthly balances over at least 12 months, adjusted for one-off items, and look closely at where in the seasonal cycle the deal is expected to close. Growth needs the same attention. A fast-growing business needs more working capital every year. A peg based on last year’s average may be too low for next year’s activity, leaving the buyer to fund the gap. Sellers, for their part, will argue that the peg should reflect the business as it is today, not as it might be. 6. Watch the Months Before Closing Working capital is one of the easiest numbers to manage in
What Buyers Should Look for Beyond EBITDA During Due Diligence
EBITDA is usually the first number on the table in any deal conversation. It is quick to calculate, easy to compare across businesses, and it sits at the centre of most valuation discussions. Apply a multiple to it and you have a headline price. But EBITDA rarely tells the whole story. In our experience at Hillpine, across more than 100 transactions in India, the UK, Europe, the US, Australia and the Middle East, the issues that move price or derail a deal are seldom hidden in the EBITDA line itself. They sit around it. Earnings that will not repeat. Profits that never turn into cash. A customer base that rests on two relationships. Obligations that behave like debt but are not reported as debt. A business that runs on the founder’s personal involvement. These are the areas we push hardest on when we act for buyers. 1. Quality of Earnings Reported EBITDA is a starting point. What a buyer is really paying for is the level of earnings the business can sustain under new ownership. That means testing what sits inside the number. Are there one-off revenues, such as a large project that will not recur or a pricing windfall? Have costs been held back ahead of the sale, such as deferred maintenance or unfilled vacancies? Is the founder drawing a salary well below market, or running personal expenses through the business? Are contractors filling roles that a new owner would need to employ directly? Are there transactions with related parties on terms an independent party would not accept? A Quality of Earnings review works through each of these items and arrives at an adjusted EBITDA that reflects the true run-rate. Adjustments can go both ways. In founder-led businesses, we often find that normalising owner remuneration and related-party rent reduces EBITDA rather than increasing it. Every adjustment the seller proposes should be backed by evidence. If it cannot be supported with invoices, contracts or ledger detail, it should not find its way into the valuation. 2. Cash Flow and Cash Conversion Profit does not always mean cash in the bank. A company can report healthy EBITDA and still struggle to fund its operations. Customers may be paying later, inventory may be building up, or revenue may be recognised well before it is billed or collected. We look at cash conversion, which is operating cash flow before tax as a percentage of EBITDA, over at least 24 to 36 months. A business that consistently converts 80 to 90 percent of its EBITDA into cash is a very different asset from one converting half of it, even if both report the same EBITDA. A widening gap between the two is often the first sign that something in the numbers needs a closer look. We also run a proof of cash, matching reported revenue and costs to bank statements. It is a simple test, and in smaller or founder-run businesses it is often the quickest way to confirm that the revenue is real. 3. Working Capital Working capital affects value in two ways. It determines how much cash the business needs to run day to day, and in most transactions it feeds directly into the price through a working capital adjustment at completion. Buyers should review receivables, inventory and payables month by month, not just at the year end. Rising debtor days or a build-up of old receivables can point to collection problems or disputed revenue. Slow-moving inventory ties up cash and may need to be written down. Stretched creditor days may look efficient, but they can also mean suppliers are being paid late to improve the closing balance sheet. The aim is to agree a normal level of working capital, often called the peg, based on average monthly balances and adjusted for seasonality. If the peg is set too low, the buyer may have to put cash into the business soon after completion. 4. Customer Concentration Buyers need to know not just how much revenue the business earns, but how secure and repeatable it is. Contracted, recurring revenue deserves a very different multiple from project or one-off income, even when both sit in the same EBITDA. When one or two customers account for a large share of revenue, the business carries more risk than the EBITDA number suggests. Losing a major account after completion can take out a significant part of the profit, and the buyer has very little time to respond. We look at revenue by customer over several years, retention and churn, contract terms, renewal dates and any change-of-control clauses. We also ask who actually owns the relationship. If the key accounts are held personally by the founder, concentration risk and key-person risk become the same problem. 5. Debt and Debt-Like Items Reported borrowings rarely capture everything a buyer will end up paying for. Most deals are priced on a cash-free, debt-free basis, so anything that behaves like debt should come off the price. Beyond bank loans, this includes lease liabilities, unpaid or deferred taxes, employee obligations such as unfunded pensions, gratuity or end-of-service benefits, accrued bonuses, overdue supplier payments, customer deposits and deferred revenue that has already been collected, related-party loans, and any pending tax assessments or litigation. The names vary by country, whether it is VAT in the UK and Europe, GST in India and Australia, or payroll and sales taxes in the US, but the principle is the same. Each of these needs to be identified, quantified and agreed with the seller as part of the net debt definition. Items that are uncertain, such as an open tax assessment, are better handled through a specific indemnity or an escrow than left to argument after completion. 6. Capital Expenditure Requirements Some businesses need regular investment in equipment, technology, infrastructure or other assets to maintain their operations. A business may report strong EBITDA, but if it needs heavy investment every year just to stand still, the cash available to the buyer is much lower. EBITDA, by definition, ignores
Your Financials Tell You What Happened: Benchmarking Shows What to Fix Next.
Revenue, EBITDA, margins, cash position and growth rate explain how a business has performed, and are predominately lagging indicators. But viewed in isolation, they do not necessarily provide breakthrough insights into management’s competence, where the relevant KPIs are underwhelming relative to the broader market trends and its broader segmentation between structural factors and temporary dislocation / inefficiencies to determine the upside potential from relevant value creation levers. Answering those questions requires more than reviewing financial statements. It requires relevant peer benchmarking, structured diagnosis and a clear link between operational improvements and business value. Why Financial Performance Needs Context A 12% EBITDA margin may appear healthy. Whether it represents strong performance, however, depends on the company’s industry, size, business model, growth stage and peer group. If comparable businesses generate margins of 16-18%, the difference may indicate an improvement opportunity. Equally, a lower margin may be understandable if the company is deliberately investing in product development, sales capacity or market expansion. The same applies to working capital, asset utilization, leverage and growth. A debtor cycle of 75 days or a particular debt-to-EBITDA ratio means little without the right context. Benchmarking provides that context. It helps management distinguish between: The objective is not to copy the peer average. It is to understand why the company differs from relevant peers and whether closing a particular gap would strengthen financial performance and enterprise value. Moving Beyond a Generic Business Score Many business assessments produce a single score or rating. While a score may offer a quick snapshot, it rarely tells management what to do next. A company may receive a good overall score while carrying a significant working-capital problem. Another may appear weaker overall but possess a highly scalable operating model and strong underlying growth. This is where the Hillpine Business Benchmarking Tool can help. The AI-enabled tool assesses 15 key financial and business-performance metrics and benchmarks them against relevant comparable companies. It then translates identified gaps into potential EBITDA, cash-flow and enterprise-value impact. The assessment examines value levers such as: Looking at these indicators together provides a more complete picture of business health than any single metric can provide. From Performance Gaps to Financial Impact Identifying a gap is only the beginning. Management also needs to understand whether the gap is material and worth addressing. For example, benchmarking may show that a company’s operating margin is three percentage points below relevant peers. The next questions are what causes the difference, how much of it can realistically be closed, what the resulting EBITDA improvement could be and what investment or operational change would be required. Similarly, an extended receivables cycle may be tying up cash that could otherwise fund growth, reduce borrowing or strengthen the balance sheet. Reducing debtor days may not increase reported EBITDA, but it could materially improve cash flow and financial resilience. Four Forms of Potential Impact EBITDA impact. Improvements in pricing, gross margin, overhead efficiency or operating productivity may increase recurring profitability. Cash-flow impact. Better receivables, inventory and working-capital management can release cash without requiring additional revenue. Balance-sheet impact. Changes to leverage, asset utilization or capital allocation can reduce financial risk and improve returns. Enterprise-value impact. Sustainable improvements in growth, profitability, cash conversion and risk can affect both the earnings base and the valuation multiple that investors or acquirers may be willing to apply. The result is a clearer view of not only where the company is underperforming, but also how much addressing the gap may be worth. Not Every Gap Should Be Fixed Benchmarking must be interpreted carefully. Being below peers on a particular metric does not automatically mean management should act on it. Some differences are inherent to the company’s business model. Others may reflect a conscious strategic choice. A fast-growing company, for instance, may accept lower near-term margins while investing in expansion. Management should evaluate each opportunity against four questions: This prevents management teams from chasing every variance and helps them focus on the few initiatives that could create meaningful value. Turning the Diagnostic into an Action Plan Once the key gaps have been identified, they should be converted into a prioritized improvement roadmap. Potential initiatives could include: Each initiative should have a defined financial objective, accountable owner, implementation timeline and performance measure. Prioritization is essential. A smaller opportunity that can be implemented quickly and with limited disruption may deserve attention before a larger but more complex transformation. The right order depends on potential impact, implementation effort, investment required and strategic importance. Why Benchmarking Matters Before an M & A Transaction Financial benchmarking is particularly valuable when a company is preparing for a fundraise, acquisition, strategic investment or sale. Buyers and investors will compare the business against alternatives. They will examine margins, growth, working capital, customer concentration, cash conversion, leverage and return on capital. Unexplained underperformance may affect valuation, transaction terms or confidence in management forecasts. Identifying these issues early gives the company time to address them before formal diligence begins. Even when a gap cannot be fully corrected, management can develop a credible explanation and improvement plan. This is more persuasive than allowing a buyer or investor to identify the weakness first. Benchmarking can therefore support both ongoing performance improvement and transaction readiness. A Practical Starting Point A business health assessment does not need to begin with a lengthy consulting exercise. The Hillpine Business Benchmarking Tool requires approximately 10 minutes of financial inputs to generate an initial assessment. It uses benchmarking and structured financial analysis to show: Rather than producing only an overall score, the tool helps management understand the specific factors influencing performance – from margins and working capital to growth, asset productivity and leverage. The initial output provides a structured starting point for management discussion and deeper analysis. It does not replace detailed financial and operational diligence, but it helps founders and CEOs focus attention on the areas most likely to improve performance and create value. From Knowing the Numbers to Improving the Business Most companies do not lack financial data. The larger challenge
From Data Heavy to Decision Ready: How AI Is Transforming M&A and CFO Advisory
M&A and finance teams work with financial statements, contracts, customer data, forecasts and transaction documents. Before leaders can decide, this information must be gathered
Buy, Build or Partner? A Financial Framework for Strategic Growth Decisions
Most management teams frame this choice too loosely. Buy is fast. Build gives control. Partner is capital-light. All three statements can be true, and none is sufficient for a decision.
Managing Cross-Border Deals: Financial Challenges Beyond Due Diligence
Cross-border acquisitions open doors that domestic deals cannot: faster market entry, new capabilities, and growth platforms that would take years to build organically. They also bring financial risks that most buyers underestimate until they are in the middle of them. Financial due diligence will tell you whether the numbers hold up. It will not tell you how the economics survive contact with a different currency, a different tax regime, a different banking system, and a regulatory environment that may view your deal structure very differently than your advisers do. To protect deal value, buyers need to work through the following issues before signing and stay on top of them through Day 1 and into integration. 1. Protect Deal Value From Currency Risk Foreign exchange risk affects more than the target’s reported revenue. It can shift the purchase price between signing and closing, alter debt service costs, reduce translated earnings, and erode the value of future dividends or exit proceeds. The buyer should map exposures across the transaction and the operating model: purchase price currency, local revenues and costs, intercompany balances, debt, supplier payments, and forecast cash flows. Where the exposure is material, the plan may include contractual protections, natural hedges, forward contracts, or currency aligned funding. The goal is not to predict exchange rates but to ensure an adverse movement does not materially weaken the investment case. 2. Reconcile Accounting Policies, Not Just Reported Numbers Similar-looking financial statements can be built on different accounting policies. Differences in revenue recognition, capitalization, leases, depreciation, provisions, employee benefits, and foreign-currency translation can distort comparisons with the buyer and complicate consolidation. Before closing, finance teams should identify the major policy gaps, quantify the adjustments, and define the opening balance sheet process. After closing, the acquired entity needs a clear reporting bridge from local statutory accounts to group reporting. Without it, management spends the first few quarters debating the numbers instead of running the business. 3. Model Tax Leakage Across the Full Cash Cycle Headline corporate tax rates rarely capture the full tax impact of a cross-border deal. Withholding taxes, transfer pricing rules, indirect taxes, interest deduction limits, permanent establishment exposure, and taxes on dividends or capital gains can materially change returns. The tax model should follow cash from the operating entity to the parent: how profits are earned, how the business is funded, how intercompany services and intellectual property are priced, and how cash will ultimately be repatriated. The post-deal structure must also have a defensible commercial rationale and sufficient operating substance. A structure that looks clean on paper but cannot withstand regulatory scrutiny is a liability, not an asset. 4. Confirm That Cash Is Actually Available Cash held by a foreign subsidiary is not automatically available to the parent. Local capital controls, banking approvals, debt covenants, solvency tests, minimum capital requirements, and withholding taxes can delay or reduce distributions. Buyers should distinguish between reported cash and distributable cash, then build a country level liquidity plan covering operating needs, local borrowing, cash pooling, intercompany funding, and repatriation. The risk otherwise is a group that looks cash-rich on a consolidated basis but must raise new funding because liquidity is trapped in the wrong entities. 5. Tighten the Purchase Price and Working Capital Mechanics Cross-border deals can magnify disputes over net debt, working capital, and completion accounts. Local practices may differ on overdue receivables, customer advances, tax balances, employee liabilities, factoring, restricted cash, or related-party items. The purchase agreement should define these items precisely, specify the applicable accounting principles and exchange rates, and avoid overlap between debt-like items and working capital adjustments. Earn-outs also require careful design: targets, currency, accounting policies, governance, and the treatment of group allocations should all be explicit. Ambiguity in these terms can quietly transfer value after closing, even when the headline valuation appeared sound. 6. Build a Reporting Model That Works From Day 1 The buyer needs timely visibility into revenue, margins, cash, working capital, and forecast performance immediately after closing. That can be difficult when the target uses different systems, charts of accounts, fiscal calendars, currencies, or management KPIs. A practical Day 1 reporting pack should define the minimum data required, owners, cutoff dates, currency translation rules, and reconciliation controls. Full system integration can follow later. The immediate priority is a reliable management view of the combined business and a clear line from local books to consolidated results. 7. Strengthen Controls Without Disrupting the Business The acquired company will often operate under a different control environment, with different approval limits, banking access, segregation of duties, and compliance expectations. Weak controls expose the buyer to unauthorized payments, inaccurate reporting, fraud, or regulatory breaches. The first phase should focus on high-risk controls: cash and payment authority, bank mandates, access to financial systems, delegated authority, related-party transactions, revenue cut-off, and statutory filings. The buyer should impose essential safeguards quickly while preserving local processes that are legally required or operationally effective. 8. Plan Finance Integration Before the Deal Closes Finance integration is not an administrative task to begin after closing. Decisions on the chart of accounts, consolidation, treasury, tax compliance, budgeting, forecasting, payroll, and management reporting affect Day-1 readiness and the timing of synergies. A clear integration plan should separate three categories: what must change on Day 1, what can be stabilized and changed later, and what should remain local. It should also assign owners, milestones, dependencies, and escalation routes. Getting this right reduces disruption and stops urgent integration work from crowding out business performance. 9. Test the Investment Case Against Local Operating Reality Financial models can miss how business is actually conducted in the target market. Customer payment cycles, supplier concentration, inflation, labor practices, dividend restrictions, licensing rules, and local financing conditions can all affect cash conversion and growth. The buyer should stress test the investment case using country specific assumptions rather than simply extrapolating historical trends. The key questions are practical ones: How resilient are margins to currency movements and inflation? How much working capital will growth consume? Can prices actually
How CFO Advisory Creates Enterprise Value Long Before a Fundraise or Exit
When business owners prepare for a fundraise, acquisition, or exit, attention naturally shifts to EBITDA, valuation, investor readiness, and due diligence.
Fractional CFO Support: When Finance Needs to Move Beyond Bookkeeping and Compliance
There are two kinds of businesses that need a Fractional CFO. The first is growing fast and finding that its finance function cannot keep pace. The second has been operating steadily for years and has never needed anything beyond bookkeeping and compliance — until now. Both are more common than they appear. And in our experience at Hillpine, the second type often needs strategic finance support the most. The Business That Has Outgrown Compliance Finance Many promoter-led businesses in the 10 to 100 crore revenue range have built genuine enterprises on the strength of a good product, strong customer relationships and founder instinct. Their finance function has kept pace in a narrow sense: accounts are maintained, GST is filed, audits are completed, and the CA signs off on the statutory requirements each year. But compliance finance and strategic finance are not the same thing. One tells you what happened and whether it was legal. The other tells you what it means and what to do about it. At 10 to 100 crores, the decisions a promoter makes, whether to expand into a new geography, take on a large order, hire ahead of demand or borrow to fund working capital, carry real financial consequences. Yet many businesses at this scale are making those decisions without the information they need. Margins are known only at the top line. Cash flow is managed reactively, often through a combination of overdraft, delayed payments to vendors and personal judgment about what can wait. Profitability by product, customer or business unit is rarely tracked. The promoter often knows, intuitively, that something is not quite right. The business is profitable on paper but regularly short on cash. Certain customers or orders feel less worthwhile than others, but there is no number to confirm it. Growth requires more working capital than expected. These are not signs of a failing business. They are signs of a business that has outgrown the finance function it was built on. In our experience at Hillpine, this is where a Fractional CFO creates the most immediate value. Not by changing what the business does, but by giving the promoter a clear financial picture of what the business actually is: which parts are profitable, where cash is going, what the working capital cycle looks like and what the business can afford to do next. Where a Fractional CFO Makes a Difference Whether the business is scaling fast or maturing into its next phase, the finance gaps look similar. A Fractional CFO can provide senior financial leadership without the cost and commitment of a full-time executive. Here is where that support tends to have the most impact. 1. Moving Finance From Compliance to Strategy The accounting function handles the books, produces management information and keeps the numbers accurate and compliant. That work is necessary, but it is backward-looking. A CFO’s role is different. It is to take that financial information and translate it into forward-looking guidance: what do these numbers mean for the business, what decisions do they inform, and what should management do differently as a result. Without that layer, businesses often have a great deal of financial data and very little financial insight. Numbers are reported after the fact. Decisions are made on instinct. Problems surface in the bank account before they appear in any report. Strengthening the finance function means closing that gap — not replacing what is already working, but building on it. 2. Building Finance Infrastructure That Can Scale Early-stage and mature businesses share a common problem: processes built for where the business was, not where it is. At smaller revenue levels, informal systems work because the founder can hold everything in their head. At 10 crores and beyond, that approach starts to break down. Reporting cycles slow, approvals pile up and financial information arrives too late to act on. In our experience at Hillpine, growing businesses frequently underestimate how quickly informal controls become liabilities. Systems that were adequate at an earlier stage, whether a single accounting package, manual reconciliations or approval processes that exist only in people’s heads, create real risks as the business grows. Data sits in disconnected places. Month-end takes longer than it should. Management receives information too late to act on it. A Fractional CFO can help redesign those processes and implement the right systems, replacing workarounds with structures that actually work at scale. This includes management reporting and review cycles, budgeting and forecasting frameworks, approval and delegation policies, clear financial ownership and accountability, and automation that reduces manual effort without losing oversight. The objective is not to add bureaucracy. It is to create enough structure for the business to scale without losing financial visibility or control. 3. Turning Revenue Into Cash Flow Visibility Revenue and cash generation are not the same thing. A business can show increasing sales, or even steady profitable revenue, while facing serious cash pressure. Receivables rise, customers take longer to pay, vendor payments are stretched, and the overdraft becomes a permanent fixture rather than a short-term tool. This is one of the most common and least-discussed problems in businesses between 10 and 100 crores. Cash flow forecasting is one of the highest-value contributions a Fractional CFO can make. A rolling forecast, updated regularly against actual collections and committed outflows, gives management a live view of where the business stands and where it is headed. It surfaces gaps before they become crises, identifies the timing of working capital needs and creates a basis for decisions about hiring, spending and investment that is grounded in what the business can actually afford. A Fractional CFO can establish that forecasting discipline and monitor working capital indicators such as receivable days, collection patterns, payment commitments and short-term funding requirements. This helps management identify potential cash gaps before liquidity becomes a problem, rather than discovering them after the fact. 4. Understanding Whether the Business Is Actually Profitable Top-line revenue can conceal significant variation underneath. A major customer may generate significant revenue but require disproportionate management time,
Preparing Finance for the First 100 Days After Acquisition
Closing an acquisition is the start of the work, not the end of it. The first 100 days set the tone for how quickly the combined business steadies its operations, brings teams together, and starts to deliver the strategic and financial benefits that justified the deal in the first place. For finance leaders, this is one of the most demanding stretches of the whole transaction. They are expected to keep the business running, give management and lenders confidence in the numbers, support decisions that cannot wait, and lay the groundwork for growth, all at the same time. In our experience at Hillpine, the difference between a smooth integration and a difficult one usually comes down to whether finance had a clear plan in place before completion rather than scrambling to build one after it. 1. Validate the Opening Financial Position Start by confirming that the opening balances actually reflect the business you have bought. Check working capital, debt, cash, outstanding liabilities and every material balance sheet account against what was assumed at completion. Go back to the issues raised during due diligence and make sure each one has been resolved or properly reflected in the accounts, rather than quietly carried forward. We often see the completion accounts and the due diligence file drift apart in the first few weeks, and closing that gap early is what gives management, investors and lenders confidence in the numbers they are being asked to rely on. 2. Align Financial Reporting Bring the two businesses onto a common language as quickly as you can. Standardise accounting policies, reporting calendars, KPIs, management packs and the month-end close so that leadership is comparing like with like. Until reporting is consistent, every performance conversation gets bogged down in reconciling definitions instead of acting on what the numbers are telling you. A shared reporting framework is what lets leadership compare performance across the group and make decisions at the pace integration demands. 3. Focus on Cash Flow and Working Capital Keep a close eye on receivables, payables, inventory, liquidity, covenant headroom and any short-term funding needs. Integration puts pressure on cash in ways that profit alone will not show, and a business can look healthy on an earnings basis while quietly running short of cash. In the first 100 days, cash discipline matters more than margin. We recommend running a rolling 13-week cash flow forecast from day one, reviewed weekly, so that surprises surface while there is still time to do something about them. 4. Strengthen Financial Controls Review approval workflows, segregation of duties, delegated authorities and the wider control environment under the new ownership structure. Founder-led businesses in particular often run on informal controls and a small number of trusted people, which works well right up until ownership changes and the founder steps back. This is also where key-person risk becomes real. If critical knowledge or sign-off authority sits with one or two individuals, document it and put cover in place before a departure exposes the business. Strong governance reduces operational risk, supports compliance, and underpins the reporting that everyone else is relying on. 5. Confirm Deal Assumptions Turn the assumptions in the investment case into measurable targets covering procurement savings, operational efficiencies, revenue opportunities and shared services. Track one-off integration costs separately from recurring performance, because once the two blur together no one can tell whether the synergies are real. That clear separation is what allows management, and any incoming investors, to see value creation as it actually happens rather than taking it on trust. 6. Refresh Budgets and Forecasts Rebuild the forecast around the combined business rather than stitching together two sets of pre-deal assumptions. Update revenue projections, operating costs, hiring plans, capital expenditure and EBITDA expectations so the guidance reflects the group as it actually is now. A forecast built on legacy assumptions gives false comfort, and it is usually the first thing lenders and boards test. Realistic numbers, even where they are less flattering, are worth far more than optimistic ones that unravel at the first review. 7. Evaluate Systems and Data Quality Assess the ERP systems, chart of accounts, master data, reporting automation and data governance across both businesses. Clean, consistent data is what makes fast, reliable reporting possible, and poor data quality is one of the most common reasons integration timelines slip. You do not have to fix everything at once. Sort out the data that feeds core reporting first, then work through the rest as part of the roadmap. 8. Build a Clear Integration Roadmap Set out the finance initiatives that matter most, such as system integration, reporting improvements, process standardisation and team alignment, and then sequence them. A phased roadmap running across the first 12 to 24 months makes ownership, timelines and success measures explicit, and it protects day-to-day operations from being overwhelmed by change. Trying to do everything in the first quarter is one of the surest ways to lose momentum. 9. Communicate Across the Business Finance should be the single source of truth throughout integration. Keep up regular, honest communication with operations, HR, commercial teams, executive leadership, lenders and investors, so that issues get raised early and priorities stay aligned. In our experience, the finance teams that over-communicate in the first 100 days are the ones that build trust fastest, and that trust is what carries an integration through the harder decisions later on. The First 100 Days Shape Long-Term Success Successful acquisitions are rarely won or lost on the deal itself. They are decided by disciplined execution once the deal has closed. A finance function that delivers accurate reporting, protects liquidity, strengthens governance, measures synergies, refreshes forecasts and turns data into decisions gives leadership the visibility it needs to realise the value the deal promised. Getting finance integration right from day one is one of the clearest early signals of whether an acquisition will deliver the returns that justified it. At Hillpine, we work alongside acquirers and management teams to build and run the finance integration
Why Mid-Market Investment Banks Struggle to Scale Deal Execution
For most mid-market investment banks, winning more mandates is a sign that the business is growing. However, bringing in more deals is only half the challenge. The greater test lies in executing multiple transactions simultaneously while maintaining the speed, quality and client experience that earned those mandates in the first place. Unlike many professional services businesses, investment banking operates in an environment where workloads are difficult to predict, timelines frequently shift and every transaction demands close coordination between multiple stakeholders. A firm may have the expertise to execute far more deals than it currently handles yet still find itself constrained by execution capacity rather than deal origination. As transaction volumes grow, firms face a fundamental question: How do you increase execution capacity without significantly increasing fixed costs or placing unsustainable pressure on your senior professionals? Below are some of the key reasons why scaling deal execution remains one of the biggest operational challenges for mid-market investment banks. 1. Deal Activity Is Inherently Inconsistent Investment banking rarely follows predictable capacity cycles. A firm may have only a handful of active transactions one month, followed by several live mandates progressing through diligence, negotiations and closing almost simultaneously. Unlike businesses with stable demand patterns, investment banks cannot accurately forecast when transactions will accelerate, pause or fall through altogether. A buyer may request an accelerated diligence process, financing approvals may be delayed, or exclusivity discussions may extend beyond expectations. Each of these events changes resource requirements almost overnight. This creates a difficult balancing act. Building a permanent team capable of handling peak workloads increases fixed costs during quieter periods. Conversely, operating with a lean team during busy periods often results in excessive workloads, longer turnaround times and growing execution risk. Finding the right balance between capacity and utilisation is therefore one of the industry’s most persistent challenges. 2. Senior Teams Become the Operational Bottleneck In most mid-market investment banks, senior professionals remain involved throughout every stage of a transaction. They review valuation assumptions, challenge financial models, guide negotiations, advise clients on strategic decisions, resolve diligence issues and oversee overall transaction quality. Their experience is often what differentiates the firm from its competitors. As the number of live transactions increases, however, every critical decision continues to flow through the same small group of senior bankers. The challenge is not simply that they become busy. They become the integration point for every important workstream. Client escalations, buyer negotiations, commercial decisions, internal reviews and transaction milestones all compete for the same limited bandwidth. As a result, execution capacity is frequently determined not by the number of analysts or associates available, but by the availability of senior decision-makers. 3. Resource Planning Is More Complex Than It Appears At first glance, resource planning appears to be a straightforward hiring exercise. In reality investment banking requires highly specialised capabilities that cannot be expanded overnight. Financial modelling, valuation, industry research, due diligence coordination and transaction documentation all require professionals with relevant transaction experience. Recruiting, training and integrating these resources into live deal teams takes time. The challenge becomes even greater because transaction timelines are rarely linear. A deal that was expected to close in six weeks may continue for another two months, while another transaction unexpectedly moves into an intensive diligence phase. Resource plans therefore require constant adjustment rather than periodic review. Unlike traditional project environments where future workloads can often be forecast with reasonable confidence, investment banking demands continuous reallocation of experienced professionals as deal priorities evolve. 4. Valuable Time Is Consumed by Repeatable Execution Activities Every transaction is unique, but many activities within the execution process are remarkably similar. Preparing management presentations, updating financial models, organising virtual data rooms, tracking due diligence requests, responding to buyer questions, maintaining transaction trackers and coordinating documentation all consume considerable time across every mandate. These activities are essential to successful execution, but they do not necessarily require continuous involvement from senior advisory professionals. When experienced bankers spend a significant portion of their time managing operational execution rather than advising clients, negotiating transactions or developing new business, the firm’s most valuable expertise is not being deployed where it creates the greatest commercial impact. Improving scalability therefore involves not only increasing capacity but also ensuring that the right people spend time on the highest-value activities. 5. Maintaining Quality Across Multiple Transactions Becomes Increasingly Difficult Handling more transactions is not simply a question of processing additional work. Each live deal requires accurate analysis, timely communication, consistent documentation and coordinated interactions between clients, buyers, lawyers, accountants, lenders and other advisors. As more transactions become active simultaneously, the complexity of managing these moving parts increases significantly. Small execution issues begin to accumulate. Financial models take longer to review. Due diligence responses are delayed. Document versions become harder to manage. Internal reviews are compressed. Client updates become more reactive than proactive. Individually, these issues may appear minor. Collectively, they affect transaction momentum and can influence how clients perceive the quality of advice they receive. For investment banks, execution quality is closely tied to reputation. Clients rarely distinguish between advisory quality and execution quality: they experience them as one integrated service. 6. Technology Improves Efficiency, But It Does Not Replace Expertise Many investment banks have invested significantly in technology to streamline execution. Virtual data rooms, workflow management platforms, AI-assisted document review, collaboration tools and CRM systems have improved efficiency across many aspects of transaction management. However, technology addresses process efficiency rather than professional judgement. Commercial negotiations, valuation decisions, buyer strategy, client advice and stakeholder management continue to depend on experienced professionals who understand both the technical and commercial dimensions of a transaction. Technology is therefore most valuable when it removes administrative effort and supports better decision-making, allowing deal teams to focus on advisory work rather than routine coordination. Flexible Delivery Models Can Support Sustainable Growth Recognising these challenges, many mid-market investment banks are rethinking how execution capacity is built. Rather than relying exclusively on permanent hiring, firms are increasingly supplementing their core deal teams with flexible execution models that