The M&A landscape is generally experiencing a robust resurgence, with soaring deal values and a palpable sense of renewed optimism among dealmakers. Many are hopeful that these dynamics and current macroeconomic tailwinds will lead to a much-needed jolt in middle market M&A. With this in mind, it’s fitting to explore how dealmakers, targets, and counsel can unlock value in the M&A context, ensuring stakeholders are prepared for acquisitions and positioned to achieve optimal deal outcomes.

Focus on Core Value Propositions

All acquisitions start from the premise that the combined businesses will be worth more than the separate businesses or that the company in the hands of the acquiror will be worth more than it is in the hands of the target’s equity holders. But the amount of value created is not a foregone conclusion, and dealmakers and counsel can add significant value at the margins through deliberate pre-acquisition preparation that aligns strategic intent with operational realities. Dealmakers should identify and quantify opportunities to command premiums, and counsel should prioritize these drivers of value throughout the course of negotiations to ensure key risks are mitigated and properly allocated in the transaction.

Value emerges from multiple levers, each requiring early assessment to build a compelling narrative for buyers and to outline the strategy for mitigating and allocating risk throughout the negotiations. In the context of strategic acquisitions and add-ons, at the outset dealmakers should assess, and counsel should understand, the intrinsic value from the combined businesses and synergies. These include cost savings and other revenue enhancements, as well as potential elimination of redundancies. 

The combined businesses may also create cross-selling opportunities based on customer overlap and product portfolios, which is often a driver of premiums in middle market technology deals. Dealmakers can audit client databases to identify potential revenue uplifts from bundled offerings, while counsel should ensure that restrictive covenants (e.g., non-compete and most-favored-nations clauses) protect these gains post-close. Market expansion, both geographically and vertically, can also unlock value, as well as operational improvements by integrating technologies and processes between the target and the acquiror. If the acquiror can gain market dominance through the acquisition, that can also enhance pricing power, although this lever should be evaluated through the lens of antitrust regulation to ensure it is achievable even under regulatory scrutiny. 

Financially, an acquisition may also enhance access to capital for either the target or the acquiror, or it may unlock value through tax benefits from net operating losses or optimized tax structures, which are particularly relevant in cross-border M&A. Identifying, understanding, and appropriately addressing the core drivers of value before and throughout the transaction will not only drive better premiums. Since deal risk increases as a deal drags on, when dealmakers and counsel align to prioritize the correct drivers of value, they can focus on the most critical deal issues and avoid being diverted by immaterial issues that add deal risk and hemorrhage value.  

In-house counsel and executives play a critical role in this process by driving early alignment within the company, controlling messaging, clarifying business terms, and ensuring all stakeholders understand strategic objectives and risk tolerance. 

Understand the Timeline and Goals for Integration & Transition Planning

Although the transition from one owner to another doesn’t happen until a deal closes, dealmakers who start with the end in mind can anticipate key hurdles and outline deliverables early. Identifying major impacts on the deal timeline at the outset, such as HSR or CFIUS approval will inform what’s possible for a closing timeline, including potential opportunities to accelerate the timeline through advance regulatory notices and early outreach to other third parties who must consent to the transaction.  

Under the updated Hart-Scott-Rodino (HSR) Act thresholds effective February 2025, the minimum size-of-transaction filing requirement rose to $126.4 million from $119.5 million in 2024. Dealmakers should anticipate more HSR second requests in technology sectors, where AI and data integrations trigger deeper scrutiny. Similarly, CFIUS trends in 2025 reflect record enforcement from 2024, with heightened scrutiny under the Trump administration’s “America First Investment Policy,” resulting in historic high mitigation rates and delays for cross-border deals. Dealmakers should evaluate the risks from these regulations at the start of a transaction and work closely with counsel to create a strategy for navigating the regulatory hurdles.

Starting operational transition planning early will surface key integration obstacles. By proactively centering these issues at proper times throughout the negotiation, dealmakers and counsel can potentially save time and effort, leading to better outcomes and reduced deal risk.  For example, modeling out the post-closing headcount early on allows for strategic and timely presentation of potential right-sizing measures. This can be a particularly sensitive topic where the target’s owner is focused on the well-being of the target’s employees, and addressing it with the correct timing and messaging can be critical for alleviating deal risk. Operations teams should begin developing their post-closing 100-day plans early on in the deal process and work with counsel on contracting for transition services with the target at closing, as well as dealing with any WARN Act compliance for potential layoffs. This level of attention at the outset of the transaction demonstrates foresight and competence on the part of the buyer, and reduces operational risk and deal risk by reducing uncertainty for the target’s employees and operators. In-house counsel and executives add value here by driving alignment on responsibilities, communication channels, and transition plans, ensuring employees and leadership understand the timing and expectations before the deal closes.

Identify and Activate Key Stakeholders and Advisors

Early stakeholder activation is essential in middle-market deals, where a cohesive, efficient team is critical to prevent delays. Begin by mapping all team players and securing buy-in among shareholders, board members, officers, and employees. A target may secure shareholder buy-in through targeted town halls that address liquidity concerns, such as tax-efficient structures or secondary sales, to avoid holdouts that could derail deal approval. In the context of the sale of a family enterprise with diffuse ownership, this may require a more personalized approach that takes into account family dynamics. Selecting counsel with the appropriate touch and demeanor is critical for achieving the right outcomes here.

The board of directors or managers should form a transaction committee early to provide oversight, meeting bi-weekly to review progress and mitigate fiduciary risks. Counsel should help identify potential conflicts of interest early on, and the board should form special committees with independent advisors to ensure arm’s-length decisions if necessary. Always keep in mind that final board decisions will require full briefings, documented in minutes, to withstand post-deal challenges, so a robust record of addressing conflicts of interest is critical in any deal where they exist.

For the internal team, assign C-suite leads to dedicated work streams (such as the CFO for financial diligence and COO for operations and transition planning), ensuring weekly check-ins to maintain momentum. Employees, often the most overlooked, require proactive retention. Develop retention plans early that include stay bonuses that align with your transition plan, and develop an internal communication strategy early on that includes a timeline for disclosing the transaction to key employees to avoid leaks and a potential exodus at a critical deal point. This is another area where in-house counsel and executives shine: ensuring internal alignment on strategy, execution, and risk, while coordinating closely with external advisors to stay focused on priorities.

On the outside, select financial advisors with deep middle-market expertise in the target’s industry. Their fairness opinions, grounded in comparable transactions, anchor pricing and provide board-level comfort. For outside counsel, opt for regional and boutique firms that can scale their involvement to match the character of the acquiror or target. Low leverage firms with high-touch service (i.e., firms with fewer associates where the partner picks up the phone and does the work) are an excellent and cost-effective option, providing sophisticated, high end legal guidance for allocating risk and deal execution, while scaling to the needs of the particular client and integrating seamlessly with the client’s internal deal team. Ask counsel about their use of AI to understand whether they are using it responsibly and efficiently. The role of outside counsel can scale by phase, with a lighter touch at the LOI phase and more intensive work during the negotiation of definitive agreements.  

Conduct Reverse Due Diligence and Internal Clean-Up

Of the potential hazards that can destroy value or derail a transaction, a seller that does not have a realistic understanding of its business and value is perhaps the most dangerous.  Proactive reverse diligence and clean-up can have an outsized effect on the value that ultimately accrues to the parties. Very few businesses are squeaky clean at all levels, and if issues with a business arise for the first time in the acquiror’s diligence, this can lead to increased deal risk through loss of trust, putting the target in a much weaker negotiating position with haircuts on price being almost inevitable. Conversely, by proactively addressing fixes at the target level before and during the deal process, targets signal readiness and competence to their acquirors, leading to higher multiples and lower deal risk.

Dealmakers and counsel can start by cleaning up any inconsistencies in the cap table.  The state of the cap table is a fundamental representation in the definitive agreements, and buyers will bristle at any notion of potential claims for closing proceeds from persons that are not listed on the cap table. 

Accounting irregularities should be addressed by reconciling to GAAP standards and migrating to buyer-friendly systems like NetSuite. For any target that anticipates a potential acquisition, having this conversation and making required changes before an LOI is discussed can avoid issues with financial modeling by the acquiror and demonstrate sophistication and quality of assets at the outset.

Other common issues include understanding any data privacy risks, which are particularly critical in AI deals. Make sure that intellectual property is properly documented and registered where appropriate, and that signed copies of all material contracts are on file. Where there are any deficiencies, develop a plan for both addressing those deficiencies and communicating them to a potential acquiror. 

Develop a Strategy for Documentation

Early documentation sets the tone for negotiations and can help filter mismatches. Dealmakers should work with their financial advisors and counsel to align on binding elements in the LOI, such as exclusivity and confidentiality, as well as highlighting key terms like structure (cash vs. stock vs. hybrid), transitional requirements (employment agreements and lease terms), potential earn-outs, and go-shop rights to facilitate fulfillment of the board’s fiduciary duties. Tax structuring should be addressed at the outset and not as an afterthought. Taking early positions on these terms can help filter out ill-fitting suitors early and save on weeks of wasted diligence. For targets, focus on balancing simplicity and clarity with necessary detail, and keep in mind a realistic expectation for any proposed earnout. Earnouts can be notoriously difficult to meet and require careful consideration of both the metrics used for their determination and the covenants and controls over the acquiror to prevent manipulation of those metrics. Advisors to sellers should assess the expected value of any proposed earnout with references to private deal studies and real-world results from companies in the applicable industry.

Key Takeaways

1. Focus on Core Value Propositions: Identify and quantify synergies like cost savings, cross-selling, market expansion, and tax benefits early to command higher premiums and mitigate deal risk by focusing on critical drivers of value and avoiding immaterial issues. 

2. Plan for Integration and Transitioning at the Outset: Start with the end in mind by assessing regulatory hurdles like updated HSR and CFIUS thresholds, and develop early operational plans, including 100-day strategies and transition services, to accelerate timelines and reduce uncertainties for employees. 

3. Identify and Activate Key Stakeholders and Advisors: Engage internal stakeholders (shareholders, board, employees) with tailored communications and retention plans, while selecting industry-expert financial advisors and scalable, AI-savvy legal counsel to ensure efficient, cohesive teams and minimize delays in middle-market deals. 

4. Conduct Reverse Due Diligence and Internal Clean-Up: Proactively clean up cap table inconsistencies, accounting irregularities, data privacy risks, IP documentation, and contracts before buyer diligence to build trust, strengthen negotiating positions, and signal business readiness for higher valuations. 

5. Develop a Documentation Strategy: Craft LOIs with clear terms on binding provisions, structure, earn-outs, and go-shop rights to set negotiation tones, filter mismatched buyers early, and protect fiduciary duties, while carefully designing earn-outs to avoid manipulation risks.