The exit is close enough to have a calendar. Now you're being asked to defer an equipment replacement, pause an expansion and leave a management role open.
The near-term financial benefit is easy to show. What happens to the business afterward deserves equal space.
If you're the PE operating partner or board member approving those moves, I'd add one requirement: show what the business will still need to spend after the cut, not just what it avoids before closing. I'm not against cost discipline before a sale. I'm against treating a change of ownership as the moment an operating need disappears.
Keep EBITDA and cash on separate lines
Deferring a capitalized equipment purchase can preserve cash in the near term; it doesn't directly raise EBITDA. Depreciation and amortization are excluded from EBITDA already. Routine repairs and salaries, when expensed, are different: reducing them can improve EBITDA, subject to what happens to revenue and other costs.
Maintenance and growth describe why you're spending. Capital expenditure and operating expense describe the accounting treatment. A pre-exit review needs both classifications.
Nor is a quality-of-earnings adjustment the same thing as a cost cut. A genuinely non-recurring expense may be added back when assessing sustainable earnings. That doesn't establish that removing a recurring cost is sustainable, or that a buyer will accept the proposed adjustment.
Have finance reconcile the historical earnings, adjustment schedule and revised forecast. Don't count a saving twice because it appears in two places.
What remains after the spending stops
A buyer is evaluating future cash generation, including whether the business can keep producing it under new ownership. An equipment replacement pushed past closing can leave the buyer with an early cash requirement. Deferred repairs can leave more downtime or higher operating costs. Either can affect what the buyer is willing to pay, even if the marketed earnings look unchanged.
Growth investment creates a different question. If you cancel the capacity expansion, does the revenue forecast still assume the extra output? If you freeze the sales hires, does the growth story still assume their contribution?
You can't remove the investment from the plan and leave its benefits in the exit story. A higher current earnings figure doesn't automatically compensate for a less credible growth outlook.
But a decline in CapEx isn't proof of neglect. The company may have completed a replacement cycle, have usable spare capacity or have found a less capital-intensive way to deliver. Better scheduling and maintenance may let the existing plant meet demand without another machine. Cancelling that purchase can be good capital allocation.
I'd protect the capability the business needs, not last year's spending level.
That means required maintenance gets a strong presumption in its favor, especially where safety, compliance or reliable delivery is involved. It doesn't mean every project labeled maintenance is untouchable. Ask whether the asset is still needed, whether the work is due and whether a sound alternative preserves the required performance.
The same scrutiny belongs on growth spending. An attractive expansion can still be premature, poorly designed or impossible to fund. Keeping a weak project alive to make the capital record look healthy is expensive theater.
Put the deferred work beside the saving
I'd use a one-page Exit Investment Review for material pre-sale cuts and deferrals, prepared by the CFO and the executive responsible for the affected operation. This is a proposed decision aid, not a valuation model.
Start with the actual request: what stops or moves, how much cash it preserves and when, and any separate EBITDA effect. Include implementation costs and commitments that remain payable. If the request mixes replacement, expansion and waste removal, split it rather than choosing the most convenient label.
Then name what changes in the operation. Does the cut remove unnecessary spending, reduce a capability or postpone work that will still be required? What happens to output, quality, customer commitments and risk? If the answer is that nothing changes, ask for the evidence.
For equipment, put the service history, condition assessment and capacity requirements beside the spending record. Acquisition dates alone won't tell you whether a machine needs replacing. For growth, connect the project to specific demand and the ability to deliver it. A backlog total isn't a profit forecast; inspect the expected margins and resources required to complete the work.
Now write down the spending the next owner would inherit: catch-up work, continuing costs and any expense of restarting the paused project. Use a supported estimate or range. Mark what you don't know. Finish with the diligence question the change creates and the records that could answer it.
In my playbook on AI in PE portfolio companies, I argue for measuring operating improvements in a form a buyer can diligence. Apply that standard to a cut too: show what changed and what it takes to sustain the result.
A hiring freeze belongs in this review for the same reason. If the current sponsor's people still perform essential operating work, identify what would need replacing when that support ends. Who will make the pricing calls, handle the major customer relationships and produce and explain the financials? Is that capability inside the company, likely to remain through the transition and included in the cost base?
Don't confuse a management team being on the org chart with the work being covered. Equally, don't assume every vacancy needs filling. A different buyer may bring capabilities the company currently lacks. Keep that buyer-specific possibility separate from the standalone operating plan.
Before approving a deferral, rerun it with the sale twelve months later. Twelve months is a stress case, not a prediction. What would have to be funded? When would you need to restart, allowing for equipment lead times or hiring and ramp-up? A deferral that is manageable for one quarter may be a different decision over a longer hold.
Negotiate the timing without assuming the reimbursement
When a worthwhile growth investment falls very close to closing, discuss its scope, timing and funding with the buyer and your advisers. The buyer may be willing to assume or share the cost because much of the benefit arrives under their ownership.
May is the important word. Don't spend on the assumption that reimbursement will follow, or pause necessary work on the assumption that the buyer will restart it. Get any agreed treatment into the transaction documents. Until there's an agreement, evaluate the investment without counting that recovery.
If liquidity forces a deferral, make that an explicit cash-preservation decision, with the operating risk and possible exit consequences visible. It may still be the right choice. Calling it efficiency doesn't improve the choice.
The review can end in approval, a smaller or differently timed commitment, or rejection. Document the reasoning so diligence can evaluate it, not so you can promise the buyer will give you credit. For an approved deferral, name who watches the affected operation and when the decision comes back for review.
A review that rejects everything isn't a discipline. It's a slogan with a signature line.
There is no standard valuation penalty to assign to these decisions, and a completed page won't predict a buyer's bid. It should let you explain which spending is genuinely unnecessary and which obligation remains. Approve the cut when the economics work. Don't approve it merely because the bill arrives after your planned closing date.
Preparing the business for what comes next?