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I am involved in a startup that has been around for 2 years and we have done a terrible job at keeping our books. We are now receiving some attention from potential acquirers but we need help putting together accurate financial statements. What should we do?

Vanessa Kruze Kruze Consulting

Vanessa Kruze

CEO and Founder of Kruze Consulting

First, congrats on the potential acquisition! Very few startups make it to this point, so the fact that you have an acquisition offer on the table is impressive.

With regards to the M&A process, all companies need to be aware that any acquiring company is going to be asking for a lot documents in the due diligence process (we’ve put together a M&A and VC due diligence checklist that you can download for free, in case you are looking to get prepared). It’s very standard for a company that is going to acquire your business to ask for at least 3 years of financial statements - the profit and loss statement, the balance sheet and the cash flow statement typically. There may be other metrics that they also look for, depending on the industry and business model that you are in.

For technology companies, especially early-stage ones, it’s often more important to show growth in non-financial areas rather than growth in revenue or profits. For example, Instagram did not have real revenue when they were acquired, but their incredible user and engagement growth drove Facebook to acquire them for a huge amount. 

That be said, having financials ready for due diligence will help any company in an acquisition situation. All public companies are required to report (and have audited) financial statements, so it’s just part of the process of becoming a highly-valued acquisition target. 

Plus, well crafted and correct financial statements will give the acquirers more confidence that what they are purchasing is of high value and high quality. So spend the small amount of money up front to get your books and taxes done right - check out our pricing page, where you’ll find bookkeeping services for much lower than you’d expect!

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