Topstory: When the deal fails before it even begins. Lessons from tech exits: the most common pitfalls, and what actually works

Selling a tech company is not a sprint. It is a marathon, and with the wrong preparation, it does not end at the finish line. It ends somewhere in the middle.

The statistics are sobering: across the industry, a significant share of M&A processes in the tech sector fail to reach the desired outcome. Not because there is no buyer, but because the seller was not ready. Or because fundamental mistakes were made that, in hindsight, seem so obvious you wonder why everyone does not know them already.

This issue takes aim at the most common misconceptions and offers what really matters: practical guidance grounded in real transaction experience.

Pitfall No. 1: Too early, too naïve, too impatient

The most dangerous moment in a tech exit is the very first one: when a founder or shareholder seriously starts thinking about a sale. That is often when the decisive mistake is made, entering the process without proper preparation.

“We have an interested party” is not a process. It is a lucky hit. And lucky hits rarely deliver top valuations, says Florian Liepert, Partner at atares and specialised in IT services transactions. The same rule applies in M&A as it does in sales: a structured approach delivers predictable results, adds Pascal Kopp, Head of Business Development & Origination at atares.

Anyone entering a structured process without a clear narrative, clean financials and an aligned shareholder structure gives away negotiating power, often without realising it. The potential buyer will notice. And they will use it.

What actually works: start preparing at least 12 to 18 months before the intended exit date. Not with the process itself, but with the groundwork. Deal readiness is not something that simply appears. It is built.

Pitfall No. 2: The valuation illusion

Every founder knows what they believe their company is worth. But that is not the same as knowing its price, meaning what the market is actually prepared to pay. A further challenge is that many founders are working with only a single number: their own aspirational figure, shaped by peer comparisons, headlines about other transactions, and the natural optimism of someone who has built something meaningful.

The reality in the M&A market is different. Buyers do not pay for what a company is today. They pay for what it can become, and for the degree of confidence with which that future can be supported.

“We see it all the time: a founder knows their business inside out, but from the wrong perspective. What matters is not their own view, but the view an informed buyer forms in the first 48 hours of analysis. And that is often a very different picture.”
Pascal Kopp, Head of Business Development & Origination, atares

EBITDA multiples are only a starting point. What really matters are factors such as recurring revenue, customer retention, the company’s independence from the founder, the scalability of the technology, and the quality of the documentation. Where those areas are weak, discounts follow, whether on paper or at closing.

What actually works: obtain an external, market-based valuation. Not to confirm your own expectations, but to establish a strategic starting point for positioning.

Pitfall No. 3: Fixating on a single buyer

Few things destroy negotiating leverage faster than exclusivity without counterweight. If only one buyer is at the table, they are sitting in the stronger seat.

Initial conversations with an interested party often feel promising. The chemistry works, the numbers seem to fit, and people start mentally projecting the future. Then the process begins to shift control, slowly but steadily, to the other side: extended due diligence, additional demands, last-minute price reductions. So-called re-trading has unfortunately become a familiar pattern in the tech M&A market.

What actually works: structured, competitive processes involving multiple qualified bidders create negotiating momentum. That is not aggressive behaviour. It is simply professional selling.

Pitfall No. 4: Underestimating cultural fit

Numbers do not close deals. People do. And yet, in many tech transactions, cultural compatibility is treated as a soft factor that will somehow sort itself out.

It will not. At least not by itself.

Founders who remain active in the business after closing, whether through an earn-out or a management retention arrangement, often underestimate how dramatically the working environment changes after an acquisition. Reporting lines, investment decisions, people issues: what was once fully autonomous now requires alignment. For many, that becomes a culture shock, creating friction that can, in the worst case, put the earn-out at risk.

What actually works: assess cultural compatibility early and actively. Speak to portfolio companies of the buyer. Discuss and document post-merger expectations explicitly, not just internally, but in the Letter of Intent as well.

Pitfall No. 5: Late-stage shock in due diligence

Due diligence is not a ritual. It is a structured deconstruction of the business, and it reliably brings to light what one would rather not see: unclear IP rights, missing employment agreements, historic tax issues, technical debt in the architecture, or customer projects built on questionable special terms.

If you are surprised at that stage, you are already on the defensive. And defensive negotiators lose.

What actually works: a Vendor Due Diligence approach, in other words a proactive review of your own business before the buyer does it, creates clarity and control. Critical issues are identified, assessed and ideally resolved before the buyer finds them. That is not a sign of weakness. It is proof of professional preparation.

The bottom line: exit readiness is not a checklist, it is a mindset

What separates successful tech transactions from failed ones is rarely a single factor. It is the consistency with which founders and shareholders make decisions over months and years that do not complicate a future transaction, but enable it.

Deal readiness begins long before the first buyer conversation. And those who take it seriously do not just get to closing. They get to the right closing.