The M&A Production Line: Why Smart Acquisition Entrepreneurs Start With Their Exit Strategy

When most acquisition entrepreneurs evaluate a potential deal, they ask themselves: "Would I want to own this business?"

…But that's the wrong question.

According to Colton Moffitt, who has completed over 100 M&A deals since 2016, the right question is: "Who will want to buy this business from me, and what will they pay for it?"

This shift in perspective transforms how you approach every aspect of the acquisition process - from sourcing deals to structuring transactions to optimizing operations.

Instead of thinking like a permanent owner, here’s why it’s important to think like a manufacturer moving products through a production line:

Know Your Buyer Before You Buy

The foundation of Moffitt's approach is understanding that different types of buyers value different assets:

Strategic buyers focus on synergies with their core business. They might pay premium multiples for a company's talent (think "acqui-hires"), intellectual property, or market access. For example - If you're targeting strategic buyers in cybersecurity, an email list of happy customers might matter less than security clearances held by key employees.

Financial buyers (private equity, family offices) evaluate deals purely on risk-adjusted returns. They want predictable cash flows, clean financials, and businesses that fit their investment thesis. Customer concentration that fluctuates seasonally is manageable; customer concentration that fluctuates unpredictably is a deal killer.

Owner-operators care most about operational fundamentals. Will the business continue generating stable cash flow after they take over? Do systems exist that don't require their constant intervention? Will the seller provide adequate transition support?

Each buyer type has different risk tolerances, valuation methodologies, and deal structures they prefer.

A manufacturing business with aging equipment might be perfect for an owner-operator who values the stable customer relationships, but a financial buyer might see only future capital expenditure requirements.

The Production Line Mindset

Thinking in production line terms forces you to optimize for volume and repeatability rather than falling in love with individual deals. Here's how this changes your approach:

Deal Sourcing: Instead of casting a wide net, you focus on businesses that match your target buyers' criteria. If you know strategic buyers in your industry are looking for companies with specific certifications or geographic presence, you prioritize those characteristics in your sourcing.

Due Diligence: You conduct due diligence not just to protect yourself, but to prepare the comprehensive package your eventual buyers will need. Financial buyers want 3 years of clean statements and detailed customer analysis. Strategic buyers want to understand talent retention and IP assets. Do this work once, upfront.

Optimization: Rather than implementing improvements based on your personal preferences, you invest in changes that matter to your target buyers. If selling to a financial buyer focused on EBITDA multiples, then optimizing gross margins might deliver better returns than expanding into new markets.

Practical Implementation

Moffitt recommends starting with direct buyer research.

Contact private equity firms or strategic acquirers in your target industries and ask what they're looking for. Most will tell you their investment criteria, preferred deal sizes, and evaluation metrics. This isn't proprietary information - you're helping them find better deals.

Once you understand buyer preferences, you can work backward to identify acquisition opportunities. If strategic buyers in your space consistently pay 8x EBITDA for companies with specific assets, and you can acquire similar companies at 4x, you've found your arbitrage opportunity.

The approach also changes how you handle operations post-acquisition. Every system you implement and every hire you make should consider the eventual buyer's needs.

Mistakes to Avoid

Here’s some common pitfalls that could thwart your goals:

Don't assume you can easily scale a business just because the numbers look good on paper. If the current owner hasn't doubled their workforce despite obvious demand, there's probably a reason - like difficulty finding and retaining qualified talent.

Avoid overpaying based on emotional attachment to a deal. Your valuation must be based on what the next buyer will pay, not what you hope the business could become.

Never skip verification of transferable assets. That PayPal account processing subscription payments might not transfer with an asset deal, creating operational headaches for your buyer.

The Bottom Line

The M&A production line approach doesn't guarantee every deal will be profitable, but it dramatically improves your odds by aligning your acquisition strategy with market realities, rather than personal preferences.

As Moffitt puts it: "You're not buying a business to love it; you're manufacturing a product for a specific customer."

The sooner you identify that customer, the better your product will be.

Thanks for reading Acquiring & Exiting.

Acquiring & Exiting is brought to you by the same team behind the Business Acquisition Summit.