Why Your Management Team Could Make or Break Your Exit (And How to Prepare Them)
How to avoid the five management team red flags that destroy exit value when you sell your business
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Last month, a business owner called me after watching his R180 million manufacturing deal collapse during due diligence.
"Everything seemed perfect," he said. "The numbers, the market position, the growth trajectory. Then the buyer started talking to my management team as part of the agreed DD process, and it all fell apart."
That question they were asked: "If the founder stepped away tomorrow, how would that impact the business?"
The silence that followed was deafening. After 20 years of building his business, this entrepreneur had unknowingly created what buyers fear most: a company that couldn't survive without him. And because he had not prepared his management team, there was no hiding the obvious risk.
If only he'd called us six months earlier, this disaster would have been entirely preventable. It does not take years to resolve, a large amount can be achieved through positioning and awareness.
Here's what every business owner needs to understand: Your management team doesn't just support your business—they determine whether it's sellable at a premium multiple.
The Five Management Team Red Flags That Destroy Exit Value (And How to Address Them Now)
After facilitating transactions worth billions in enterprise value, I've identified five recurring management team issues that consistently slash valuations. More importantly, I believe there is a simple solution to fix each one:
1. Your business revolves around you, not your systems.
The biggest value killer is remaining the central decision-maker for everything.
In our market research, we have seen founder led technology businesses generating R45 million+ in revenue that struggle with buyer interest despite strong financials. The issue? Buyers perceive founder dependency risk rather than a scalable enterprise.
What you can do starting today: Document every process that currently requires your personal involvement. Create written delegation protocols that clearly define decision-making authority for each management role.
The goal isn't to become irrelevant—it's to become strategically focused rather than operationally trapped.
2. Your management team lacks the experience buyers demand.
Buyers pay premium multiples for institutional-quality management teams, not just loyal employees who've grown with the company.
In our research into M&A industry deal flow, we consistently observe distribution companies that attract lower offers because their management teams have never worked elsewhere or managed significant P&L responsibility. Buyers question whether these teams can handle growth under new ownership.
What you can do starting today: Audit your management team's external experience and capabilities. Consider strategic hires who bring outside perspective and proven track records.
But here's a critical insight: Don't try to fully replace yourself with an executive before the sale. Most founders lack the skill set to manage executive-level personnel effectively. Instead, plan to work with the acquirer on the handover process. This reduces the risk of hiring someone the buyer doesn't like and ensures a smoother transition.
3. You haven't planned for what happens when key people leave.
Nothing terrifies buyers more than discovering that losing one person could cripple operations.
In analysing businesses that failed to achieve premium multiples, we regularly see manufacturing operations lose R25+ million in valuation when buyers discover succession planning gaps: key personnel nearing retirement, critical staff job hunting, or sales directors who have never documented client relationships.
What you can do starting today: Create written succession plans for every critical role, but focus on retention strategies that actually work.
Cash incentives typically work better than equity shares. I've seen too many complications arise from giving away equity—profit shares and cash rewards are usually more effective and better received by staff. Save equity sharing for truly critical personnel where there's an established risk of departure. In other cases, the old “golden handcuffs” work wonders!
4. Your managers think tactically, not strategically.
Buyers expect to inherit leaders who understand the bigger picture, not just operators who execute tasks.
When reviewing our market research, software companies with R200+ million opportunities often struggle when management presentations reveal that department heads can't explain how their work supports overall business objectives.
What you can do starting today: Include your management team in strategic planning sessions. Ensure they understand not just what they do, but why it matters to business success.
Test their ability to articulate your company's value proposition and growth strategy. If they can't explain it clearly, they need more strategic context before any potential buyer meetings.
5. You've created a culture of dependency rather than empowerment.
The final mistake is building a team that waits for permission rather than taking initiative.
Across the South African market, we observe businesses that see offers reduced by 30% when buyers notice that every decision, regardless of size, gets deferred to the founder.
What you can do starting today: Implement formal decision-making authorities for each management role. Create clear guidelines about what decisions they can make independently and which require consultation.
Build accountability structures that reward initiative and problem-solving, not just task completion.
The Critical Mindset Shift: Selling Into Growth
Here's the game-changing perspective that transforms how your team views a potential sale:
Driven by two contradictory statements:
Don’t tell anyone who does not have to know that you are in a sale process—keep it a secret for as long as possible.
Be sure that your senior staff is ready for a business sale and sees it as an opportunity rather than a threat to their employment.
When done properly, you're always selling into growth. Well-priced deals are rarely about cutting costs or downsizing—they're about expansion and opportunity. Your team gets new opportunities in a larger enterprise with more resources.
This is crucial when explaining to senior staff that you're planning an exit. Frame it as growth and opportunity, not uncertainty. The best transactions add people and capabilities rather than taking them away.
This mindset shift keeps your best people engaged throughout the process rather than looking for the exits. In most business exits I have been involved in, the owner/founder openly admits that they are, in fact, holding back the business from real growth, but at the same time, their staff fear a sale to an unknown party.
Building a Management Team That Adds Value to Your Exit
The businesses that command premium valuations have management teams positioned for growth under new ownership:
Start hiring for tomorrow, not just today. The management team that got you to R50 million may not be equipped to reach R200 million under new ownership. Plan your management development with future scale in mind.
Encourage external visibility. Support your managers in building industry relationships, speaking at conferences, and developing recognition beyond your company. Buyers value managers with external credibility.
Develop financial literacy across your team. Every department head should understand key metrics and their impact on profitability. This preparation pays dividends during buyer discussions.
Position your team as growth enablers. The most powerful message in any exit discussion: "Here's what this team could achieve with additional resources."
Your Strategic Advantage
Ask yourself honestly: If I stepped away from daily operations for six months, would this business thrive or struggle? Your answer reveals whether you have an asset that buyers will pay premium multiples for, or a dependency that will concern them.
Remember: You don't need to be completely out of the business before you can sell it. You just need a strong management team that can handle operations while you focus on strategic leadership. The acquirer will likely want you involved in the handover anyway—work with them to find your replacement rather than struggling with it alone.
The difference between a founder-dependent business and an institutionally-managed enterprise isn't just operational—it's the difference between selling a job and selling a valuable asset.
Buyers don't just acquire financial performance—they acquire the capability to sustain and grow that performance. Your management team isn't just part of the transaction—in many cases, they are what makes the transaction possible at premium valuations.
Deal Leaders is ready to explore your exit options and help you address these management team fundamentals. We can position you for an exit process that rewards you for the value you have created in your business.
Until next time,
Rick Grantham
Deal Leaders International