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Insight · Exit Readiness

Reduce costs before selling the business

Every £1 of run-rate earnings added in the 12-18 months before exit typically returns £6-12 of enterprise value at typical mid-market multiples. That maths matters more in a selective market: global M&A deal values ran at around US$4 trillion in 2025, up 15% even as deal volumes fell 9% [2, 3] — buyers are paying more for fewer, better-prepared businesses, and a defensible cost base is what gets a deal over the line rather than re-traded. This is how to run a cost programme that lifts valuation without leaving scorched earth for the buyer.

By Matt Buckley

Why cost reduction before exit is different

Post-deal cost reduction is a buyer's game - aggressive, fast, and often visible in the business. Pre-exit cost reduction is the opposite: it needs to be defensible, sustained for at least 6-12 months at run-rate, and free of the kind of red flags (mass supplier churn, capex deferrals, quality drops) that will show up in diligence. The cost of getting this wrong is real: UK insolvency statistics recorded 2,191 company insolvencies in England and Wales in July 2024 alone, with creditors' voluntary liquidations making up 77% of cases and a liquidation rate of roughly 1 in 177 companies over the previous 12 months [1] - a reminder that a fragile cost base, not just a weak market, is often what tips a business from "sellable" to "wound up".

The 12-18 month exit cost plan

Months 1-3: diagnose and prioritise

  • Spend baseline and category prize sizing
  • Benchmark against market and against peer transactions
  • Identify categories that can move without diligence risk

Months 3-9: deliver run-rate savings

  • Category sourcing on indirect and direct spend
  • Supplier consolidation where fragmentation is high
  • Contract structure aligned to post-transaction continuity

Months 9-18: prove run-rate and de-risk

  • Six months of finance-validated run-rate for the CIM
  • Clean diligence pack - contracts, savings evidence, category ownership
  • No cliff-edge renewals landing in the buyer's first 12 months

What to avoid

  • Deferring capex to flatter the number - buyers price it back in
  • One-off benefits dressed as run-rate
  • Cutting into commercial capacity or brand-critical spend
  • Contracts with punitive termination clauses timed near close

The valuation maths

At an 8x multiple, £1m of durable run-rate earnings is worth £8m of enterprise value. For a UK mid-market business with £30-50m of addressable spend, a well-executed pre-exit programme typically lifts earnings by £2-4m - which at multiple translates to £15-30m of value uplift for a cost of a fraction of that.

Where this connects

Pre-exit work draws on our cost reduction and business strategy services, and typically pairs with the Earnings improvement guide.

References

Every figure cited above is drawn from the independent sources below. Numbers in square brackets in the text link to the matching source.

  1. Company insolvency statistics, England & Wales — The Gazette (official public record)
  2. Volume of mergers and acquisitions worldwide — Statista
  3. Global M&A Industry Trends, mid-year 2025 — PwC

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