Founders who search for CPG exit preparation are usually one of two people: an owner who has had an unsolicited offer and realises they are not ready, or an investor who wants to know whether a portfolio brand can be sold at a good price in the next two to three years. In both cases the answer is the same. Buyers pay for earnings they can trust, growth they can explain and a business that does not depend on one person. This guide sets out what acquirers look at, a practical 24-month timeline, and the mistakes that cost sellers value at the negotiating table.
Brand Refinery is a CPG consulting firm that helps consumer brands and the private equity firms that back them build retail strength, clean data and a credible growth story ahead of a transaction. This article is general information, not legal, tax or financial advice; involve your accountant, tax adviser, M&A counsel and a sell-side adviser before you act.
What buyers are actually buying
A strategic acquirer or private equity firm is buying a stream of future profit and a position on the shelf. They test both. The profit side is checked through the financials. The shelf side is checked through retail data, distribution, velocity and the strength of the brand with the shopper.
One published CPG exit handbook from Green Circle Capital describes the market as having "returned to an EBITDA world": strong growth paired with healthy margin is attractive, while younger, fast-growing brands are often valued on revenue. The practical lesson for a founder is to know which lens a buyer will apply to your brand, and to prepare evidence for it.
The five things diligence will test
1. Quality of earnings
Buyers expect financial statements that are consistent, transparent and audit-ready, and they will adjust your EBITDA for one-off items. Your task is to get ahead of that by presenting normalised EBITDA with every add-back documented. Each add-back should have a reason and a supporting invoice or contract. Monthly closes completed within roughly two weeks, on an accrual basis, make the numbers believable.
A sell-side quality of earnings report, commissioned from an accounting firm before you go to market, lets you find problems before a buyer does. One published preparation guide estimates the cost at roughly $15,000 to $25,000 for businesses below $3 million of EBITDA and $25,000 to $50,000 between $3 million and $10 million, taking six to eleven weeks. Treat those as indicative and get quotes.
2. Trade spend and gross margin
CPG buyers know that reported revenue can flatter a brand if trade spend, promotions and chargebacks are booked loosely. The Green Circle handbook notes that sellers should be able to show trade spend effectiveness, because buyers use it to judge whether margins are sustainable. Be ready to show gross-to-net by customer, promotion calendars and results, and a clean reconciliation of deductions. If you have not done this work, our guide to trade marketing strategy for CPG brands is a good starting point.
3. Customer, SKU and channel concentration
Buyers will break performance out by SKU, customer and channel, because concentration affects how durable earnings are. A published preparation guide suggests aiming for top customers below roughly 20 to 30 percent of revenue, ideally on signed renewals. If one retailer or one hero SKU carries the business, plan how to reduce that dependence before you go to market, or be prepared to explain it. See our guides on Walmart, Kroger and Costco for how to broaden retail without overextending.
4. Retail data and velocity
Buyers want third-party data that shows your brand is gaining share and selling through, not just shipping in. That means clean SPINS, NielsenIQ or Circana reporting, with velocity per store per week, distribution points and repeat trends. Our retail data guide explains how to read and present it.
5. Legal, regulatory and operational hygiene
These items quietly derail deals when found late:
- IP assigned properly: trademarks held by the company, with signed assignments from founders, employees and contractors.
- A clean capitalisation table and records.
- Labelling and claims that stand up to scrutiny under FDA, and MoCRA for beauty. See FDA labeling requirements.
- A list of material contracts, with change-of-control and assignment clauses flagged, including co-packer, distributor and retailer agreements.
- Co-manufacturing and supply terms that a buyer can inherit. See how to choose a co-packer.
- Recall history, quality records and insurance in good order.
A 24-month exit preparation timeline
Published guidance generally recommends starting 12 to 24 months before a sale, and the Green Circle handbook says preparation often takes one or two years or more. A workable sequence:
- Months 24 to 12: set the baseline. Obtain an independent view of value, review margins and customer concentration, and decide what must change. Start leadership planning so the business does not rely on the founder alone.
- Months 18 to 9: fix the reporting. Move to timely monthly closes, build the add-back file, document core processes and strengthen the second layer of management.
- Months 12 to 6: clean the foundations. Tidy the cap table, complete IP assignments, list consents needed on change of control, scope the quality of earnings and assemble the first version of the data room.
- Months 6 to 0: go to market. Engage a sell-side adviser, prepare a teaser and confidential information memorandum, build a buyer list, open a data room behind NDAs and manage bids to a letter of intent.
Growth initiatives should show measurable results within the 12 to 24 months before a sale, so launches and retail wins that need time to mature should start early.
Founder dependency and succession
Buyers look for brand loyalty that will outlast the founder. A Green Circle handbook citing ForceBrands survey data reports that 66 percent of executives surveyed have no succession or backfill plan. Do not be in that group. Document who owns supplier, retailer and distributor relationships, who runs finance, and who would run the business if you stepped back. A buyer who sees a capable second layer will pay for it.
Tax and structure
Structure can change what you keep after a sale. The Green Circle handbook discusses, for example, the Qualified Small Business Stock exclusion and estate planning thresholds, and says planning should begin well before a transaction. Rules change and depend on your entity type and timing, so take advice from a qualified tax adviser early rather than after a letter of intent.
Common mistakes
- Starting preparation after receiving an offer, when you have no leverage and little time.
- Going to market with unreconciled trade spend and deductions.
- Letting one customer or one SKU dominate without a plan or an explanation.
- Presenting retail sell-in as if it were consumer demand.
- Leaving IP, contracts and consents untidy until diligence.
- Treating the founder as the operating system of the business.
- Choosing a buyer on headline price alone and ignoring escrow, earn-outs and working capital terms.
Frequently Asked Questions
How long does it take to prepare a CPG brand for sale?
Published guidance generally recommends starting 12 to 24 months before a sale, and one CPG exit handbook says preparation often takes one or two years or more. Once the decision to sell is made, running the sale process itself takes several further months, including diligence, which commonly takes weeks.
What is a quality of earnings report and do I need one?
A quality of earnings report is an independent accounting review that tests whether your reported EBITDA is accurate and repeatable. A sell-side version, commissioned before you go to market, helps you find and fix problems before a buyer does. One published guide estimates costs of about $15,000 to $50,000 depending on size; get quotes for your business.
What do buyers look for in a CPG brand?
Buyers test the reliability of earnings, trade spend and gross margin, concentration across customers and SKUs, third-party retail data showing velocity and distribution, clean legal and IP records, and whether the business can run without its founder. Strategic buyers also assess fit with their own portfolio and distribution.
Is a CPG brand valued on revenue or EBITDA?
It depends on the brand. One published CPG exit handbook says the market has returned to an EBITDA focus, with profitable growth the most attractive profile, while younger, fast-growing brands are often valued on revenue. Ask a sell-side adviser which lens buyers in your category are using today.
When should a founder talk to an adviser about selling?
Well before you plan to sell. Speaking to an M&A adviser, an accountant and a tax adviser 12 to 24 months ahead lets you fix issues while there is time to show improvement. If an unsolicited offer arrives, ask for a short delay before engaging so you can prepare properly.
Next step
If you are a founder or investor planning an exit, Brand Refinery can assess your retail data, trade spend, concentration risk and growth story ahead of a transaction. Learn more about our consulting services or our team, then book a strategy call.