As CEO and founder of COREDO, I often see how owners of investment companies approach exit with ambition but encounter unexpected barriers. Preparing an investment company for sale to an investor requires a systematic approach: first we strengthen the legal structure of the business, then we optimize financial reporting and operational processes to increase the company valuation and minimize risks.
Legal structure for investors
In practice the buyer evaluates not the “beauty of the presentation”, but three things:
- whether the asset can be safely purchased without hidden tails,
- whether the company can be run without the founder,
- how predictable the cash flow and compliance risks are.
Therefore preparation for sale is not “sprucing up” the reporting, but assembling a manageable asset: legally clean, financially transparent, operationally autonomous.
Investors first of all check the transparency of the legal structure.
Legal readiness checklist (what the investor will ask for in the first 72 hours):
- current cap table (who owns, entry/exit terms, pledges, options, convertible instruments);
- shareholders agreement (drag-along / tag-along, reserved matters, procedure for approving transactions and investment decisions);
- absence of “shadow” arrangements: side letters, verbal commissions, unrecorded partnerships;
- IP and software rights: who owns algorithms/code/models/datasets, any assignment from contractors;
- corporate “hygiene”: meeting minutes, director appointments, charter updates, signatory authorities;
- documents on KYC/AML governance: who is MLRO/Compliance, which policies are approved, how risk decisions are recorded.
A practical step: create a single data room and bring documents to a single version (contract versions, dates, signatures, attachments). It’s banal, but it saves months: the investor sees order — and exerts less price pressure.
Avoid typical traps: nominee directors in Singapore or unrecorded partnerships in the Czech Republic can derail due diligence. We always formalize exit mechanisms from partnerships in advance – through put/call options in shareholder agreements. This protects everyone and demonstrates maturity.
Optimizing financial position for valuation
Key metrics: free cash flow (FCF), Debt/EBITDA below 3x and return on invested capital (ROIC) above 15%. For investment firms add AUM (assets under management), portfolio diversification and a track record of returns – at least 3 years of audited data.
Do a Quality of Earnings (QoE) before going to market. The investor will almost always order QoE themselves — and will use the findings as an argument to reduce the price. If you prepare QoE in advance, you control the agenda.
What is usually “cut” in valuation:
- one-off revenues that will not recur (one-off deals, single performance fees);
- revenue dependence on 1–2 large clients/LPs;
- “on-paper” income without confirmation by cash flow;
- expenses that were hidden in capex/outside the P&L;
- risks of clawbacks/commissions/disputes under contracts.
Prepare the company’s financial statements under IFRS: balance sheet, P&L, cash flow with breakdown by fees and performance fees. Conduct an external sale audit, from a Big Four, to confirm operational profitability.
Minimum “financial package” that speeds up the deal:
- management reporting for 24–36 months (P&L / CF / BS) + bridge EBITDA → FCF;
- revenue breakdown by streams: management fee, performance fee, success fee, advisory;
- unit economics (if there is client acquisition): CAC, LTV, churn, payback;
- AUM report: dynamics, concentration, asset structure, limits, drawdowns;
- 3-year forecast with assumptions (Base / Downside) and market sensitivity;
- tax memo: where tax is paid, risks of permanent establishment and transfer pricing.
Step 3: operational model without the owner
Minimum set that increases trust:
- investment committee: regulations, quorum, decision records;
- risk framework: limits, stop-rules, independent risk/compliance function;
- compliance framework: MLRO/Compliance Officer, decision log for EDD/PEP/sanctions;
- operational framework: who runs onboarding, who is responsible for reporting, who handles incidents;
- KPI dashboard: AUM, net inflows, churn LP, performance vs benchmark, operational SLAs.
Key metrics: gross margin >60%, ROE >20%, LTV/CAC >3. Document intellectual property: patents on portfolio management algorithms, brand trademarks, software licenses. In the EU, register them through EUIPO in advance.
Sales strategy and deal structuring
The company’s sale strategy depends on the type of investor: strategic (for synergy) or financial (for growth). We recommend “Company for sale”: build with the exit in mind: annual business revaluation, data-driven decisions.
How deals are most often structured in investment companies:
- Share deal (purchase of shares) — convenient when value lies in the license, contracts, brand goodwill.
- Asset deal — when the company has a “history” of risks, and the buyer takes only the assets/contracts.
- Step deal — entry in tranches: initially minority, then control upon meeting KPIs.
To reduce friction, they often use:
- escrow (part of the price is held for 6–18 months to cover claims);
- W&I insurance (representations and warranties insurance — especially if there’s a large buyer);
- regulatory conditions: “closing after approval/notification”, plus a list of “pre-closing covenants”.
Tips on timeline and risks:
- Month 1–2: Audit and restructuring.
- 3–6: Financial optimization, SOPs.
- 7+: Teaser, negotiations, closing.
Risks: tax claims — insure against them; conflicts with partners: specify in agreements. COREDO provides full support: from registration in Dubai to AML audit in the EU.
Practical tip: don’t go to market “raw”. If you want a premium valuation, prepare the company as a product: clear risk profile, predictable numbers, manageability without the owner, and transparent compliance. Then negotiations are not about “why do you have a hole here”, but about growth, synergy and price.
At COREDO we usually carry out preparation using the model: Vendor DD → structure finalization → QoE/IFRS → operational autonomy → data room → negotiations and closing. This reduces the discount and speeds up the deal.