2025 M&A Lessons #1 - The Grass Isn’t Greener…Unless You Fertilize (Structure) and Water (Post-Closing Integration)
You know what all the deals that we closed in 2025, have in common? Not a perfect, proprietarily-sourced acquisition target. Not pristine financials that survived QOE without adjustment. Not a blemish-free legal diligence memo or an acquisition process with no hiccups.
No, the common denominator – Buyers who are comfortable with transaction structure and understand the real value-generator is their work after closing.
Even The Good Deals Have “Hair”
Sorry to burst your bubble eager searcher, but you are never going to find the perfect deal.
Some of you need to read that again.
Financial Issues
When the financial diligence is done, those promising financials likely won’t look so pristine anymore. When your top-notch QOE team arrives (hopefully Elliott and Guardian), they will dig through the target’s financials to identify: events that are not recurring and cannot be expected/relied on in the future; accounting errors; and bookkeeping inconsistencies. In our experience last year (with various QOE providers), every potential acquisition saw EBITDA figure drop at least 10%, but we saw drops as extreme as 30-40%.
Legal/Operational Issues
Similarly, if you have a careful legal team like Cadet Legal performing diligence, they will find risks, gaps, and lapses in the various important areas (governance, material contracts, operations) of your target. We commonly find things like:
General informality where material customer and supplier agreements and relationships are not papered, but instead subject to verbal agreements/understandings (real example - the biggest customer relationship is governed by a handshake, and that relationship evaporates weeks before closing);
Failure to observe corporate formalities, specifically, that threaten the limitation of liability in the target (real examples: LLCs without operating agreements even where legally required; C-corps without bylaws or actually issuing shares; either with no written consents or actions by the members or board)
Worker misclassification and other lingering employment risks;
Intellectual property (a core asset for consumer brands) not properly protected or lacking clear chain of title.
We saw instances of financial, legal, and operational risk like the above in EVERY deal that we CLOSED in 2025.
Assuming basic legal diligence and QOE don’t prompt you to find another deal completely, you will still have to decide whether you want to move forward with the acquisition despite its flaws.
As you’ve followed this series on M&A, we hope that you’re not getting the impression that we are the risk police or anti-seller. Just the opposite - we value the life-changing, legacy and retirement-securing potential of small business acquisitions so much that we do our best to get good deals closed for both buyers and sellers. Also, our M&A practice is comprised ~25% sell-side representations and growing.
Yes, we emphasize deep, intentional financial and legal diligence. But when that diligence uncovers issues, we turn that same intensity and focus to structuring a solution that addresses the risk, but still allows the buyer and seller to move forward.
When we say “structure,” we don’t mean simply doing an asset purchase. That is a basic and useful way to carve-out risks, but can create its own diligence and operational challenges. When we say structure, we are thinking beyond the basic stock vs asset purchase question and more about mechanisms like:
Earnouts with clear milestones/KPIs and measurement procedures;
Indemnification escrows and specific indemnities where appropriate;
Baskets and caps (our law clerk, Talha, will explain these mechanisms soon);
Put and call options;
A/R collection mechanisms and swaps;
Specific post-closing covenants;
License-to-buy structures;
SPVs to add equity to your capital stack.
To get your deal closed may mean accepting that it will take more time allocating and aligning risks, value and capital than a straightforward “cash for your business” deal. Even if you are not familiar with this kind of deal structuring, you at least have to be comfortable with your lawyer and/or financial advisor designing it for you. The ability to appropriately identify risk and then reach into the toolbox to structure around it – this is why experienced M&A counsel can’t yet be replaced by a business attorney with AI. This is one of the reasons that not every lawyer that negotiates commercial contracts is equipped to get your acquisition closed.
Implementing structure does not guarantee that you will grow value, but it does provide a more fertile environment for value to grow.
After You Plant the Seed, You still Have to Water It
We love helping buyers (especially first time ones) identify and close on an acquisition. That’s planting the seed of value and providing it the fertile environment (structure) to allow growth. As operators and builders at heart, however, we are especially excited to stay with our buyers after closing to help with the real work - post-closing integration and operational cleanup. You’ve planted the seed, structure serves as fertilizer, now you need to water it.
To see what they paid for show up in cash flow, margin, and growth rather than just in a model, our smartest buyers approach integration with maniacal focus – aligning people, workflows, and systems. It’s how they turn a signed purchase agreement into a single, cohesive business with clear leadership, clean processes, and one coherent operation instead of two loosely connected entities . Nailing post-closing integration can compress the time from “we bought it” to “it’s actually performing like we knew it could.” Conversely, buyers that skip or improvise post-closing integration usually see missed synergies, rising churn, and key people walking out the door.
Research on acquisitions supports this. Many underperforming deals trace back to weak integration and failure to capture synergies, while disciplined integration planning and execution materially improves ROI and profitability. For SMBs specifically, integrating workflows and go‑to‑market (GTM) systems reduces duplication, speeds decisions, and cuts operating costs, directly lifting margins. One study of 450 SMBs found that integrated GTM systems improved market responsiveness by 34% and reduced customer acquisition cost by 27% versus fragmented approaches.[1] Structured integration practices are also associated with higher employee retention and faster realization of deal value, which is critical when a single key hire or lost customer can materially impact outcomes in smaller businesses.
What specifically does post-closing integration look like?
You know those issues you found in diligence? As a starting point, to the extent they haven’t been fixed in closing, you start tackling those issues by applying the processes and principles below.
Businesses, especially small ones, are about the people. Earlier in this series, we emphasized emotional intelligence in the deal process. Don’t forget about that EQ post-closing – you need it now more than ever. Establishing and maintaining regular and clear communication with all stakeholders (not just stockholders) is crucial. You might run an integration process as simple as: weekly integration huddle, issue/risk log, and monthly review against KPIs.
Clarify integration goals and KPIs (revenue, customer retention, key cost synergies, employee retention).
Communicate the vision, what’s changing/not changing, and a simple Day 1–90 plan to employees and key partners.
Stabilize customers: personal outreach to top accounts, honor key terms, clarify points of contact and service standards. Identify and secure key people (retention plans, clear roles, leadership structure, decision rights) – we recommend doing most of this pre-closing.
Remember those financial risks? Implement standard accounting processes financial controls, banking access, billing/AR/AP routines, basic reporting, and short-term cash monitoring
Remember the problem of contract informality? Review key contracts, licenses, insurance, and compliance obligations; renew or renegotiate where needed.
Remember those governance gaps? Work with counsel to resolve them.
Notice – nothing in the above list includes layering on technology, let alone AI. AI can be a force multiplier when you have your basics covered.
Over the past almost fifteen years, I have seen that the deal doesn’t necessarily create value on closing day, it creates value in the months that follow. Effective post-closing integration (and operational cleanup) is one of the main drivers of value in SMB acquisitions. It is where you either lock in your upside – turning those synergies on paper into real cash flow and growth in real life – or quietly give it away. Finally, post-closing integration proves especially important if you intend to have the seller remain involved for an extended transition period, which is common and often a value generator.
Disclaimer. The contents of this article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Your viewing and/or use of the contents of this article do not create an attorney-client relationship with Cadet Legal. The contents are intended for general informational purposes only, and you are urged to consult with counsel concerning your situation and specific legal questions you may have.
