The gap between what a UK technology business owner expects to receive for their business and what they actually receive — in money, in terms, and in outcomes for their team — is one of the most consistent patterns in small-cap M&A.
It is not usually the result of bad faith on the buyer’s side. It is usually the result of a process that was never designed to serve the seller’s interests.
Why the standard process fails sellers
The typical route for a founder selling a £1m–£4m IT or MSP business looks something like this: appoint a broker, prepare an information memorandum, run a limited auction among a shortlist of buyers, negotiate heads of terms, survive due diligence, and complete.
The problem with this process is that it optimises for a completed transaction, not a good one for the seller. The broker’s fee is contingent on completion. The buyer’s interest is in getting the deal done at a price they can justify internally. The seller’s adviser — if they have one — is often a solicitor focused on legal risk rather than commercial outcomes.
By the time heads of terms are signed, the seller has usually disclosed substantial information, spent significant management time, and allowed the buyer into conversations with key staff. The leverage has shifted.
What good looks like
The founders who navigate exits well tend to do a few things differently.
They start thinking about it earlier. Not to rush the process, but to have a clear picture of what the business is worth, what a realistic multiple looks like, and what the tax position will be at different transaction sizes. That picture changes the decisions they make in the years before a sale.
They understand what buyers actually pay for. Revenue quality — specifically contracted, recurring revenue with low churn — is worth more to a buyer than raw turnover. A business with £2m of ARR is worth more than a business with £2m of project revenue. Understanding this changes how owners run their businesses in the years before exit.
They choose buyers, not just processes. A trade buyer who will fold the business into their operation and extract the margin is a different proposition from an operator who will run the business and grow it. The latter tends to be a better cultural fit for founders who care about what happens to their team. It also tends to produce more conservative earnout arrangements — less upside, but less risk of the earnout conditions being manipulated.
They protect the things they care about. Team continuity, client relationships, the business’s identity — these are negotiable, but only if you negotiate them. Most founders leave these to the goodwill of the buyer and are disappointed.
The tax dimension
Business Property Relief changes taking effect in recent tax years have altered the calculus for some founders. The treatment of business assets in estate planning is now different from what many founders assumed when they structured their businesses. If your exit timeline was loosely “sometime in the next five years”, it may be worth revisiting whether that timeline still makes sense.
This is not a reason to rush. It is a reason to have the conversation now rather than deferring it.
Paul Carroll is CEO and CFO of Hoki Limited. Hoki buys and operates founder-led technology businesses in the UK. If you are thinking about what the next chapter looks like for your business, get in touch.