The 6th D

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I have been a CPA for nearly 35 years and a CEPA for about seven years, and for most of that time, the 5 Ds have been part of the conversation that changes attitudes in the room. Death, disability, divorce, distress, disagreement. EPI’s research says roughly half of all owner exits are involuntary and get triggered by one of those five, and when you say that out loud to a group of owners, people stop looking at their phones.

I have started adding a sixth this past year. Disruption, by which I mean what AI is doing to the way buyers think about what a company will earn five years from now. Here is the objection I keep hearing, and why I came down on the other side of it.

The objection is that it is already covered. Distress is in the five. If AI eats into a company’s margins, that is distress, and we have a word for it. Fair enough on the surface. But distress in the EPI sense shows up in your numbers, and by the time it does, you are negotiating from a weak position. What I am describing shows up somewhere else first, in the buyer’s model, while your P and L still looks perfectly healthy.

The bigger difference is what you can actually do about the other five. It is not that they are sudden, because most of them are not. A divorce takes years to arrive. Partner disagreements simmer for a decade before anybody says the word buyout out loud. Distress usually builds slowly enough that everyone sees it and nobody wants to be the one to bring it up. What the five have in common is that they are personal, they happen inside the ownership group, and there is paper that addresses them. A buy-sell agreement. Funded life insurance. Disability coverage. A partner exit clause. You cannot prevent the event, but you can keep it from setting your price.

There is no document for the sixth. Nobody underwrites a policy against your industry being repriced.

I also want to walk back something I have said myself and have heard from other advisors: this one will not force anybody out of their business. It potentially could do just that. It is just slower about it. An owner who does not pay attention for four or five years can end up with a company no buyer wants at any price, and that is a forced exit; it just arrives without a hospital bill or a court date. The long fuse is the good news, and it is also exactly why owners often set it aside.

The version I keep running into does not look like a company in decline. It looks like a healthy services business, revenue in the eight figures, three strong years behind it, owner in his early sixties thinking about going to market in a year or two. Clean financials, no customer concentration problem, key people committed to stay. Then somewhere in diligence, a buyer asks for headcount and billable hours broken out by service line, disappears for a week, and comes back well under where the owner had it in his head. Nothing in the trailing numbers was wrong. The buyer had built his own view of what that work costs to deliver in 2031, and the owner had never modeled it, so all he could say was that he disagreed. In a negotiation, disagreement without evidence is just a discount.

Bain’s 2026 M&A Report found one in five strategic dealmakers walked away from a deal last year over what they expected AI to do to the target’s business. PwC’s mid-year outlook has buyers turning cautious in sectors where AI may disrupt revenue models, naming professional services, IT services, insurance brokerage, and wealth management. Ordinary businesses with employees, offices, and customers they have had for thirty years.

None of which means your business is in trouble. Most of the companies I look at are fine, and a fair number are more profitable than they were two years ago because of these tools. But there is a question I ask now that I was not asking three years ago, which is how much of your revenue depends on work a buyer believes software will do more cheaply by 2031, and what you can put in front of him when he asks. If you cannot answer with numbers, you have an opinion, and buyers discount opinions. It runs the other way too. No adoption at all reads as no plan, and that gets priced whether or not the risk was ever real in your case.

I am not offering this as a correction to EPI. Their five have held up a long time. I have just found the conversation goes better when the sixth is on the table with the others instead of hovering over everything. If any of this is relevant to where you are, I am glad to compare notes.