The Exit Playbook

After building and selling multiple technology companies himself, James Marciano learned firsthand how unforgiving the M&A process can be. Today, as founder & CEO of Tuck Advisors, he helps entrepreneurs navigate the same terrain he once struggled through — from understanding how buyers actually value businesses to structuring deals that protect founders, teams, and long-term missions.

In our conversation, Marciano explains why most deals never make it across the finish line, how technology and process can transform the lower middle-market M&A landscape, and why the pet industry — driven by premiumization, data, and the human-animal bond — is becoming one of the most compelling sectors for founders and buyers alike.

Make sure that you understand the value of your company to a buyer. It's not that you're going to get the full value of how you impact the buyer's financials, but you should at least understand your impact from a negotiating perspective. (Different buyers will value your company in different ways, hence the wide spread observed in bids in an auction process.)

Fundamentally, the buyer's decision will be based upon a build or buy decision. Oftentimes, buyers will want to get to market sooner, for either financial or strategic reasons, and this will benefit the seller. Oftentimes, they will also value the seller's team, and we all know how hard it is to hire great talent. So again, I'd say make sure you really understand the value of your business vis-a-vis any interested parties and make sure that they know that you know how you will positively impact their business. 

There are a few things. First off, the industry has an abysmal record in terms of getting deals across the finish line, something like 35%. To me, 35% tells me it's a broken process. My own experience hiring investment bankers was poor. They took my retainer money and literally introduced me to three companies. I flew across the country to meet one of the CEOs, and when I showed up at his office, he didn't even know who I was. That's a true story. I wound up negotiating the sale of my company on my own to a very sophisticated buyer, and I left millions of dollars on the table. I thought I was a smart guy, but I hadn't gone through a process like this before. He bought my company and two others, rolled us up, and took us public.

My company represented 20% of the revenue of the combined companies, and I got less than 1% of the deal. This goes back to the answer above. You really need to understand the value of your business to the buyer. I'd say the other thing that really made me want to come out of retirement to build Tuck Advisors is that other firms didn't really seem to understand me as an entrepreneur, how I operated, and the amount of effort I'd put into building my company.

Finally, the investment bankers I came across did not understand technology or process. I felt strongly that there was an opportunity to leverage technology and process in a way to reach a broader list of buyers, especially in the lower middle market (companies valued between 10 and 100 million dollars). 

Growing up, animals were always my best friends. My grandmother was instrumental in crafting some of the earliest animal rights legislation in this country. And most of my family has been vegetarian or vegan for most of their lives. The vets that came to our farm, sometimes several times a week, became family friends. 

When we did our first pet deal last year, Animal Behavior College, I thought it was a great opportunity to use that as an entry point to lean in. Since we'd already been doing a lot of work in the mental health space, it frankly felt like an extension of that. To me, pets = good mental health.

I'm so grateful to be focusing on the Pet space, another working industry led by mission-driven founders. That, in turn, attracts team members at Tuck Advisors who care about those same issues. 

The parallels are striking, particularly in the premiumization of care. In healthcare and education, consumers have moved toward high-touch, specialized services (like concierge medicine or personalized tutoring), and we are seeing the exact same trajectory in the pet industry. Pets are no longer just 'property'; they are family members, and owners are willing to invest in premium health and wellness services that mirror human standards.

This shift is why we are seeing pet insurance become so popular in the U.S. and why entirely new categories are emerging, such as telehealth, health monitoring devices, and longevity solutions for pets. These innovations are a direct response to the owner's desire for the same level of sophisticated, data-driven care they expect for themselves.

Furthermore, all three sectors are currently defined by a severe labor constraint. Whether it’s a shortage of nurses, specialized teachers, or veterinarians and groomers, the 'war for talent' is a primary bottleneck to growth. This has led to a shared demand for personalization. To scale effectively despite these shortages, companies must leverage technology to deliver a customized experience for the end-user while ensuring that their highly-skilled professionals are working at the top of their license.

The real value of technology is that it acts as a translator for the species gap. Pets are evolutionarily wired to hide pain and discomfort, which often leaves owners playing a guessing game with their health. The most significant shift we see is the move toward integrated health monitoring, using biometrics and AI-driven behavior analysis to create a holistic view of a pet's mental and physical state.

By capturing subtle shifts in sleep patterns, mobility, or even mood, technology is moving the industry from a reactive 'crisis-care' model to a proactive 'wellness' model. This creates a feedback loop for the pet parent: for the first time, they have measurable proof that a specific diet, supplement, or enrichment routine is actually working. It transforms the pet parent from a casual observer into an informed advocate, providing them with a data-backed 'ROI' on the premium care they provide. Ultimately, the companies creating the most value aren't just selling gadgets; they are selling certainty and a deeper understanding of a family member who can’t speak for themselves.

Most sellers are looking for something more than just the highest bidder. In the case of Animal Behavior College, it was really important to our client, Steve, to make sure that whoever bought the company would continue the great work that he and his team had done over the past several decades.

He also wanted to make sure that his team was taken care of. Many of his employees had worked for Steve for 10, 20, even 30 years. Steve wanted as many of these folks as possible to be retained post-transaction.

For ABC, we went out to 750 companies around the world, a mix of strategic buyers and financial buyers. After IOIs, and management presentations, we were left with three strong LOIs – with one being preferred above the other two because they ticked the two boxes around continuing the mission and retaining the team. The buyer had done several other acquisitions and was very proficient in the M&A process. In fact, we closed the deal in a record 31 days. Most importantly, our client was delighted with the outcome. 

It’s making sure that you understand how a buyer will value your company. Companies are evaluated on the basis of three things. First, what is the absolute amount of net income or EBITDA? Second, what is the percentage of net income relative to gross revenue? And third, how quickly is the company growing in terms of revenue and the bottom line? Understanding this will help to guide CEOs in terms of what they should focus on. For example, you wouldn't necessarily want to make a large investment that's not going to pay dividends (in terms of increased revenues and/or profits) for several years if you're thinking about going out to market next quarter. 

You should also make sure that everything is buttoned up. For example, you should double-check that your employees (both W2 and contractors) have signed appropriate letters of non-compete and assignment of inventions. You want to make sure that you filed any IP that you could. You want to be on an accrual basis, not a cash basis for accounting. (Even though it may not make a difference in your business, buyers are almost universally going to be on an accrual basis. So it makes it easier for them to understand your financials when it comes time for financial due diligence.)

Also, if you're thinking about trying to exit the company soon after you sell it, then you're going to want to make sure there's a strong second-in-command who will stick around. Having said that, your investment banker will benefit from having optionality, meaning that you're willing to stick around for up to a year, especially in a situation where you're trying to bridge a valuation gap, and there needs to be an earn-out in place to do that.

(BTW, you may have heard that earn-outs have a bad reputation. I disagree. As long as they're structured properly, then I think they can be a great way to increase the transaction value. I've started and sold my own companies with earnouts, and companies that I've invested in, and I've had clients who have had earn-outs, and I can tell you that it can work out very well as long as you pay attention to the details.)

Someone once told me years ago that you should know who's going to buy your company before you start it. That might be a little bit tongue-in-cheek, but honestly, it's not far off. (If you’re ever curious about why a company might buy you, feel free to use The M&A Analyzer.)

As I mentioned, different buyers will value your company in different ways. So you should start thinking about how you can steer your company in the direction of buyers who will value your business most highly. 

When selling my own businesses, I never felt the need to sell it at the top of the market. I always wanted to leave something for the next guy. You want to sell when things are going well, when things are going up and to the right. Do not think about trying to make the last dollar. That is a mistake. 

Also, you want to be prepared in case you get what we call a UFO™. That's our trademarked term for Unsolicited Flattering Offers. I always say that valuable companies don't go unnoticed for long. So if you've built something of value it’s likely that people have already started reaching out to you about potentially selling your company.

While these UFOs tend to be hoaxes, sometimes they're real. To that extent, having things buttoned up as we talked about regarding employee contracts or your IP or your accounting can be really helpful in efficiently navigating a UFO. The number one axiom of M&A is Time Kills Deals. So if you don't have these things in order, it can slow down the process and put the transaction at risk. 

To this last point, I would add that having a team around you that you trust that can help you execute a deal is critical. So even if you don't think you'll be selling in the next few years, have an M&A lawyer, an accounting firm that specializes in M&A transactions, and an M&A advisor at the ready. 

I believe the most attractive companies will be those that have successfully transitioned from a transactional model to 'Wellness-as-a-Service.' Buyers, especially those with a long-term strategic lens, are looking for businesses where recurring revenue is the foundation. Whether it’s through subscription-based nutrition, integrated health memberships, or automated wellness spending accounts, predictability is what drives premium valuations.

However, the real 'alpha' for buyers in five years will be proprietary data and defensibility. A brand that simply sells a high-quality product is vulnerable to competition; a brand that owns a pet’s longitudinal health and behavioral data is a fortress. This data layer creates an incredible moat, it allows the company to predict a pet’s needs before the owner even realizes them, making the service virtually impossible to churn from.

Buyers want 'plug-and-play' assets that have de-risked their future growth. They will gravitate toward companies that can prove margin durability through high customer lifetime value (LTV) and those that have a professionalized second-in-command, ensuring the business thrives long after the founder has exited.

It's however the client defines success. For some, it's about making sure that their mission is accelerated. For others, it's making sure their team remains intact. Some founders focus on the highest bid, especially in a smaller transaction. Some founders want to stay long-term and continue building the business, while others want to leave as soon as possible. Oftentimes, both buyers and sellers talk about culture fit (which can be hard to judge during a process).

Whatever it is, we really try to understand our clients’ motivations at the beginning of any engagement so that we can optimize for that. As an example, we recently helped a client navigate a UFO Response process. There were three UFO’s to start, and two flew away pretty quickly. The remaining UFO was a well-known company and our client was confident that the marketplace would react positively to the news if this buyer were to acquire his company.

He really enjoyed his interactions with the buyer and felt like his employees would be well taken care of. While we made it very clear to our client that we felt like we could get him a much higher valuation if we took him to an auction process, that was not his priority. His priority was to close the deal, stay the 12 months required as part of the deal, and then move into full-time retirement. I'm glad to say that we were able to accomplish that for him. 

I would look for three core pillars that separate a long-term institution from a passing trend:

There are two main reasons why this is a meaningful space to be in:

In a lot of industries, you have to choose between 'doing well' and 'doing good.' In the pet industry, those two goals are perfectly aligned. We are professionalizing a space that is fueled by love, and there is no more meaningful place to apply decades of tech and M&A experience than right here.