Data Readiness in M&A:
Lessons from the
M&A West Stage
Financial data integrity often dictates a deal’s success. Yet, many growing companies wait until they are under intense buyer scrutiny to realize their operational foundation is straining.
Data Readiness in M&A : Building a Foundation for Successful Transactions
At this year’s M&A West conference in Napa, CA, Scrubbed took the stage to address this exact reality. Moderated by Scrubbed’s Managing Principal, Darwin Pangilinan, the featured panel discussion, Data Readiness in M&A: Building a Foundation for Successful Transactions, brought together distinct perspectives from across the deal table. The panel featured Arash Farin (CEO, Centerstone Capital), Thar Casey (CEO, AmberSemi), and Steve Monterrosso (CEO, Sharevault).
The discussion bypassed theoretical advice and focused entirely on the real-world methodologies for auditing and structuring data before diligence begins. Here are the core best practices and tactical lessons the panel shared.
The Four Dimensions of Data Readiness
To kick off the session, Pangilinan posed a foundational question to the room: How critical is data readiness to a transaction, and why must founders view it as more than just an administrative hurdle?
Arash Farin responded by breaking the importance of data down into four distinct operational dimensions that directly protect a seller’s position:
- Valuation Impact: The way your data is prepared and organized directly shapes the deal narrative, influencing ad-backs, deal structuring, and final valuation.
- Reducing Retrade Risk: Providing a cohesive, organized dataset upfront prevents buyers from executing an 11th-hour retrade under the guise of discovering hidden surprises.
- The Time Factor: There is an old saying that time kills all deals. Lacking GAAP financials or an active review stalls the process, whereas data readiness allows you to move at a pace that preserves transaction probability.
- The Signaling Mechanism: Buyers, particularly private equity firms, want to acquire companies that are cohesive and organized. Cohesive data readiness signals that you operate like a much larger, mature enterprise than the numbers on the page might suggest.
Steve Monterrosso backed up this framework, noting that across thousands of data room transactions, the middle-market companies that stand out are those operating with a continuous deal-readiness mindset. Operating this way communicates to a buyer from day one that the post-merger integration will be smooth and that the leadership team is easy to do business with.
The "Day One" Operational Discipline
Building on this framework, the panel explored how a founder maintains operational effectiveness while navigating a transaction. Entrepreneurs often treat M&A readiness as a frantic, final sprint right before going to market, but the panel firmly challenged this approach.
Farin advised founders to “run your company as if the deal may not happen,” ensuring operational health remains the true priority. Thar Casey expanded on this, stressing that data readiness is a day-one discipline. Founders must focus on building fundamental value rather than chasing external noise or “shiny pennies.” Practically, this means maintaining pristine records, from fully reconciled cap tables to documented consulting agreements and termination letters, from the very beginning.
Why is this continuous discipline so critical? Because, as Steve Monterrosso pointed out, most companies are bought rather than sold. When an unexpected buyer arrives, a reactive scramble often exposes hidden gaps in the ledger or broken operational patterns that take months to correct. Operating from a day-one discipline prevents this fire drill.
Real-World Battle Scars and Pitfalls
In M&A, time is the ultimate enemy of a high valuation. A standard transaction process can easily stretch from six to twelve months. “Time is the enemy,” Casey noted. “You hear that the clock is ticking. That is your enemy.”
When execution hasn’t kept pace with growth, hidden data gaps quickly expand into major transaction roadblocks. The panel shared specific operational liabilities that frequently impact valuations or stall timelines:
- Compliance Gaps: Farin highlighted recent transaction friction points, including an e-commerce data breach that triggered multi-state attorney general scrutiny, and a company penalized because hourly workers in California weren’t documenting required lunch breaks.
- Tax and Financial Gaps: Monterrosso flagged that many SaaS companies operate across state lines without tracking or paying state-level taxes, creating a massive exposure that buyers will discount against valuation.
Resolving these gaps before a buyer begins their scrutiny is non-negotiable.
The Reality of Tech-Enabled Transactions
To mitigate these risks efficiently, the panel discussed leveraging modern automation. Farin noted that the market is facing a “tsunami” of AI-related automation, sharing that investment professionals are already uploading thousands of pages of raw data into tools like Claude to rapidly extract risks and draft investment memos. He encouraged leaders to dedicate an hour a day to understanding these applications.
However, Monterrosso offered a critical caveat: “AI doesn’t fix bad data. The first step is to make sure you have the right foundation.” If the underlying financial processes are broken, technology simply processes disorganized information faster. AI is meant to amplify good people and eliminate busy work, but a solid, clean accounting foundation must exist first.
Building the Core Ecosystem
Navigating these complexities requires more than internal effort. Farin highly recommended engaging a core transaction ecosystem, including an investment banker, an attorney, a wealth manager, and a CPA firm, well ahead of a planned exit to structure complex mechanisms like QSPS tax mitigation. Monterrosso agreed, noting that having this team in place prevents founders from playing banker and missing their own operational targets.
This is the exact layer of execution our partner-led teams take responsibility for. Scrubbed delivers the accounting, tax, advisory, and audit services that middle market companies rely on to establish true data readiness. Our senior professionals take ownership of the day-to-day execution, ensuring your foundation holds up under the intense pressure of due diligence.