Kishen Patel
Founder, Consult EFC | ICAEW Chartered Accountant
Kishen helps UK business owners achieve fundraising readiness before entering high-stakes M&A conversations. He specialises in identifying financial gaps early so that founders can protect their valuation and maintain leverage throughout the diligence process.
Table of Contents
Fundraising Readiness Essentials
If you are entering M&A talks in 2026, your “Fundraising Readiness” determines your leverage. Prioritise these five pillars:
- Financial Accuracy: Month end accounts closed within 15 days and fully reconciled across all reports.
- Capital Efficiency: Evidence of positive unit economics (LTV/CAC) and a clear route to cash generation.
- Data Room Hygiene: A tidy, pre-populated data room to prevent “price chips” caused by diligence delays.
- Tax & Compliance: Clean records that meet the 2026 UK Making Tax Digital (MTD) standards for SMEs.
- Strategic Runway: At least 9 to 12 months of cash to ensure you negotiate from strength rather than necessity.
M&A conversations can feel like a friendly coffee until the first diligence request lands. Then it turns into an X-ray. Buyers and investors look for the same thing: proof your business is real, repeatable, and well-run.
That’s why Fundraising Readiness matters even if you think you’re “selling, not raising”. If you can’t raise on credible terms, you’re rarely in a strong position to sell, because the weak points are identical.
In 2026, scrutiny is sharper. Costs are still high, lenders stay cautious, and buyers want cash discipline, not just ambition. They also expect clean reporting fast, because deal teams move quickly once they’re interested.
The good news is you can get materially more ready in weeks, not months. The aim of this guide is simple: help you spot the gaps early, fix what matters first, and enter talks with options.
Free M&A & Fundraising Readiness Audit
Is your deal room defensible against buyer scrutiny? Spend 30 minutes with Kishen Patel to stress-test your financials and capital efficiency before you start a formal process.
We will review your reporting cadence and reconciliation logic to ensure your numbers hold up under a deep-dive X-ray.
Identify the “price chips” in your current data room and unit economics before they become leverage for a buyer.
● Currently accepting 2 readiness audits per week.
Run a quick reality check on your numbers before anyone else does
⚠️ Red Flag: The Reconciliation Gap
If your management accounts do not tie back to your bank statements and statutory filings, a buyer will assume your reporting is unreliable. In the 2026 market, “near enough” is not good enough. Even a 2% discrepancy can trigger a deep-dive audit that stalls your deal momentum for months.
A strong story can open doors, but it can’t rescue weak financial basics. In M&A talks, your numbers set the tone. If they’re late, inconsistent, or hard to explain, confidence drops and price follows.
Start with a quick internal “diligence rehearsal” you can do with your finance lead in a morning. Keep it practical:
- Close cadence: Can you produce month-end accounts within 10 to 15 working days?
- Consistency: Do revenue, gross margin, headcount, and cash tie back across reports?
- Evidence: Can you back key lines with invoices, contracts, payroll records, and bank statements?
- Tax hygiene: Are VAT, PAYE, and Corporation Tax positions clear and up to date?
- One version of truth: Do the board pack, forecast, and KPI dashboard reconcile, or do they tell different stories?
If any of those feel shaky, fix them before you take calls with corporate development teams or investors. Otherwise, you’ll spend the whole process answering basic questions, while the buyer quietly reduces risk by reducing price.
If you can’t explain a number quickly, assume someone else will explain it for you, usually in the least generous way.
💡 Insight: The 2026 Close Cadence
In a high interest rate environment, buyers are obsessed with “velocity of information”. If you can close your month end accounts in under 10 days, you signal a level of operational maturity that justifies a premium valuation. It proves you are managing by data, not by gut instinct.
The three statements buyers and investors will test first
Expect the first deep questions to land on the P&L, balance sheet, and cash flow. They show how you make money, what you owe, and whether you can survive delays.
Profit and loss (P&L): “Good” looks like clear revenue recognition, stable gross margin logic, and sensible overhead trends. If gross margin jumps, you can explain why. If sales grew, you can show which customers drove it.
Balance sheet: This is where messy finance hides. Buyers look for unreconciled bank accounts, old receivables, strange prepayments, and unclear accruals. They also check whether stock, work in progress, and deferred revenue are tracked properly.
Cash flow: Cash proves whether profits are real. Clean cash reporting shows working capital movements, tax payments, and financing flows without mystery transfers.
Common red flags that slow or kill momentum include unreconciled accounts, one-off income presented as recurring, unexplained “add-backs”, unclear VAT or payroll liabilities, and management accounts that don’t match statutory filings. None of these are fatal on their own, but silence or confusion is.
Burn rate and runway in plain English (and what they signal in M&A)
Burn rate is how much cash you spend each month after cash in. Runway is how long your cash will last at the current burn. Buyers care because short runway forces bad decisions, like rushed fundraising, discounted valuation, or an earn-out you can’t control.
Keep it simple:
- Monthly net burn = cash out per month minus cash in per month (ignore non-cash items, focus on bank reality).
- Runway (months) = cash in bank divided by monthly net burn.
A healthy buffer depends on your model, but in most SME processes, less than six months creates pressure. Pressure shows up in negotiations as tighter terms, longer escrow, heavier warranties, or “we’ll pay later if you hit targets”.
Also, tie runway to milestones, not hope. “We’ll be profitable soon” isn’t a milestone. “Signed three enterprise contracts and reduced payback to three months” is.
Prove you can turn funding into results, not just activity
Buyers don’t pay for busy teams. They pay for outcomes they can trust. In 2026, that often means capital efficiency, credible margins, and a clear route to cash generation, even if you’re still investing.
This section is about turning your narrative into proof. It’s not about pretending everything is perfect. It’s about showing you understand what drives performance, and you can repeat it.
The strongest position is when you can say, with evidence: “When we spend £1 here, we get £x back, within y months, and we know why.”
That proof comes from three places:
First, traction that holds steady across time, not just a single quarter. Second, unit economics that don’t rely on future miracles. Third, a plan for the next 12 to 24 months that links spend to milestones.
If you’re entering M&A talks, buyers will test whether growth is durable without the founder doing everything. If you’re fundraising, investors will test the same thing because they don’t want to finance chaos. Different label, same test.
Traction that holds up under scrutiny: revenue quality, churn, and concentration
⚠️ Red Flag: Masking Churn with Aggressive Sales
Sophisticated investors look past top-line growth to find “leaky bucket” syndrome. If you are spending heavily to acquire new customers while existing ones are quietly leaving, your valuation will be heavily discounted. Always present cohort-based retention data to prove your growth is sustainable.
Traction is not just “we grew”. It’s how you grew, and what happens next if conditions tighten.
Buyers and investors usually start with revenue quality:
- Recurring versus one-off income.
- Contract length, renewal terms, and pricing clauses.
- Discounts, credits, and professional services that mask product weakness.
Retention matters because it reduces risk. If churn is rising, explain what changed and what you did about it. If you have cohorts, show them. If you don’t, at least show repeat purchase rates, reorder intervals, or contract renewal history.
Then comes concentration risk. If one customer makes up a large share of revenue, you don’t need to hide it. You do need a plan. That could be broadening the pipeline, locking in longer terms, or creating a second route to market.
For non-subscription firms, the same logic applies. A strong order book, repeat contracts, framework agreements, or a stable mix of customers can be just as persuasive as MRR. The key is to show predictability, not buzzwords.
Unit economics and capital efficiency checks you can do in an afternoon
💡 Insight: Payback vs. Growth
In 2026, a 12 month payback period is the new gold standard for UK SMEs. While aggressive growth was once rewarded at any cost, buyers now prioritise “Self-Funding Growth”. If your CAC is recovered quickly, you have the ultimate leverage: the ability to walk away from a bad deal because you do not need the cash to survive.
Unit economics sounds technical, but the goal is simple: do you make money each time you sell, after the direct costs to win and serve that customer?
Run a quick set of checks:
Unit Economics: The 2026 Readiness Dashboard
Customer Acquisition Cost
Total sales and marketing spend divided by new customers or new gross profit. Consistency is key: choose one method and document it clearly for the buyer.
Lifetime Value
Gross margin per customer over the customer lifetime. In 2026, buyers ignore best case assumptions; you must use real retention data to support this figure.
Time to Recovery
The months required for gross profit to cover CAC. A shorter payback reduces funding risk and significantly lifts valuation confidence during M&A talks.
Cash Scalability
Revenue minus variable costs (including fulfilment and success). This metric proves whether scaling your business helps or hurts your cash position.
Positive unit economics doesn’t mean you’re fully profitable today. It means growth doesn’t create a bigger hole. In 2026, many investors prefer steady margins and cash control over flashy top-line growth that burns cash without learning.
If your metrics are weak, don’t hide. Show the fixes: price changes, targeting higher-margin segments, reducing fulfilment costs, or improving onboarding to cut churn. A buyer will respect clear action more than perfect slides.
Make your deal room tidy so diligence does not derail your valuation
⚠️ Red Flag: The Messy Cap Table
Undocumented “promise” shares to early employees or unvested options without clear paperwork are deal-killers. Buyers want a clean path to 100% ownership. If your equity structure requires a “cleanup” mid-process, expect the buyer to demand a significant indemnity or price reduction to cover the legal risk.
A messy data room is like inviting someone to view your home, then turning off the lights. Even if the fundamentals are good, the buyer assumes the worst. Delays then turn into price chips.
Speed and trust matter because M&A teams have multiple deals on the go. If you respond quickly and cleanly, you become the “easy” deal. That can protect valuation more than most founders expect.
Aim to start organising 6 to 12 months before you want to raise or sell. If you’re closer than that, still start now, just prioritise. Assign clear owners, set weekly deadlines, and keep the data room simple.
Also, remember that 2026 brings extra compliance pressure for many SMEs, including expanded Making Tax Digital requirements for some taxpayers from April 2026. If your tax records are messy, diligence will find it, and it will slow everything.
Cap table, options, and debt: clean it up before you start the conversation
Cap Table & Equity Audit
Cap table issues rarely improve with time. They become significantly more painful when a buyer’s lawyers arrive. You must be able to answer these five questions on a single page:
- • Ownership: A clear breakdown of who owns what today.
- • Options: What options exist and what is currently vested.
- • Convertibles: Anything that converts into shares (SAFEs, loan notes) and the specific terms.
- • Debt: All existing debt, including director loans and personal guarantees.
- • Rights: Side letters, unusual consent rights, or specific investor preferences.
The Risk: Unclear rights and preferences trigger last-minute renegotiation because they change who gets paid, when, and how. Fixing these mid-process causes unnecessary stress, legal costs, and distraction.
Strategic Advice: Line up approvals early. If you need board or shareholder consent, plan the timeline now rather than when a buyer is pressing for exclusivity.
Your core documents checklist for a buyer-ready, investor-ready business
Core Data Room Checklist
Before you share anything externally, set up a basic data room with clear naming and version control. One source of truth beats ten half-right files. Here is what most processes will require:
The Consistency Sweep: After assembly, ensure dates, customer names, and totals match across all files. Discrepancies create doubt and slow momentum.
Decide your best path: raise first, sell first, or do both in parallel
💡 Insight: The Psychology of the Dual-Track
Running a fundraise and an M&A process in parallel is not just about keeping options open. It creates a “Competitive Tension” that forces buyers to move faster. When a corporate buyer knows an institutional investor is doing diligence, they are far less likely to attempt a late stage price chip.
Once you’ve checked the basics, you can choose a path from strength, not urgency. The right answer depends on runway, traction, and who has leverage.
Raising first can extend runway and improve negotiating power in M&A. It can also distract leadership and take longer than expected, especially in a cautious market.
Selling first can be right when strategic fit is clear, and the buyer can unlock value you can’t reach alone. The downside is you may accept terms you wouldn’t choose if you had more time.
A dual-track process, running fundraising and M&A in parallel, can work. However, it needs tight planning and consistent messaging. If your story changes depending on who’s listening, trust drops fast.
A simple decision framework based on runway, leverage, and risk
Use this table as a quick gut-check before you commit to a process.
| Situation | Path: Raise First | Path: Sell First | Path: Dual-Track |
|---|---|---|---|
| Runway | 6 to 9 months + strong metrics | Under 6 months + limited appetite | 9 to 15 months + cash control |
| Leverage | Multiple investor interest | Clear strategic buyer interest | Inbound interest + good metrics |
| Risk Profile | Execution risk is acceptable | High risk without a partner | Team can handle parallel work |
Signals you’re not ready for any path yet are boring, but real: unclear numbers, unresolved legal issues, messy cap table, weak retention, or a forecast that relies on best-case wins. Fixing those first often creates better terms later.
Your 26-week readiness plan: what to fix first so you move faster later
You don’t need perfection. You need momentum, ownership, and a realistic timetable.
The 26-Week Readiness Roadmap
Weeks 1 to 4: Financial Tidy-up & KPI Baseline
Close the books properly, reconcile key accounts, and agree KPI definitions. Build a simple cash model that matches the bank reality to ensure your foundation is solid.
Weeks 5 to 8: Model, Milestones & Narrative
Produce a 12 to 24 month forecast with clear assumptions. Set milestones that connect spend to outcomes. Align your story across fundraising and M&A so it stays consistent for all parties.
Weeks 9 to 16: Data Room Build & Proof Points
Populate the data room, clean contracts, and gather proof points (case studies, renewal history, pipeline coverage). Reduce concentration risk where possible to protect your valuation.
Weeks 17 to 26: Outreach & Negotiation Positions
Start discreet conversations, test valuation expectations, and learn from questions. Tighten the model, improve documentation, and prepare your final negotiation positions.
💡 Pro Tip: Keep it manageable by assigning one owner per workstream (finance, legal, commercial, and operations). Without ownership, readiness turns into a never-ending side project.
How Consult EFC can help
If you want better M&A outcomes in 2026, treat Fundraising Readiness as your baseline. Clean numbers, proof you can turn cash into results, and a tidy deal room protect valuation and reduce stress. Then choose the right process, raise first, sell first, or dual-track, based on runway and leverage, not panic.
If you’d like a clear view of what to fix first, Consult EFC can run a readiness review that supports growth, investment, and exit planning. The best time to start is before anyone else asks the questions.
Free M&A & Fundraising Readiness Audit
Is your deal room defensible against buyer scrutiny? Spend 30 minutes with Kishen Patel to stress-test your financials and capital efficiency before you start a formal process.
We will review your reporting cadence and reconciliation logic to ensure your numbers hold up under a deep-dive X-ray.
Identify the “price chips” in your current data room and unit economics before they become leverage for a buyer.
● Currently accepting 2 readiness audits per week.
One Response
Really insightful. Thank you.