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Maximizing Value

Selling a Business for 50% More
- Case Studies

by Basil Peters on January 2, 2014 · 5 comments

Most people have difficulty believing that you can sell a business for 50% more just by executing the exit well. I’ve written before about how this can be achieved. This post has video excerpts where you’ll see CEOs and Chairs who have actually done it.

It is very unusual to hear case studies like these. Almost every exit is covered by a non-disclosure agreement. These are rare cases where the acquiring company was public, and small enough to make the transaction material to their financial statements.

In our business, we see prices increase 50% about half of the time. We know of many other cases like these, but unfortunately we can’t share the other stories.

Parasun’s CEO – Moving the Price from $10 million to $14.8 million

  • The biggest factor was multiple bidders
  • The M&A advisors had the ‘good cop – bad cop’ thing down
  • The CEO ended up being the person the buyer confided in during the negotiations


Parasun’s Largest Shareholder – Adding $2 million more

  • It was important that Barry not be involved in the negotiations
  • We needed to have ‘someone on the outside’ for ‘the bad guy’ to come back to
  • Barry’s job was in large part theater
  • “If I had been sitting at the table I would have caved”
  • This was Barry’s third exit
  • The difference was that he brought in pros that sell [companies] all the time
  • The importance of stipulating a working capital on closing – a $2 million win
  • “I thought, well, that pays for them” [the M&A Advisors]


The full case study on Parasun is available here.


Pacinian’s Chairman – Moving the Price from $20 million to $30 million

  • Pacinian was pre-revenue – so the entire value was intangible
  • Exit strategy minimum selling price was $10 million
  • Exit strategy asking price was $20 million
  • Closing price was $30 million
  • That took some competition
  • When we were certain we’d get more than one bid, we raised the price.


Read the full Pacinian case study and view the complete set of video interviews here.


Vineyard’s CEO – Moving the Price from $18 million to $28 million

  • They re-did the valuation and discounted everything
  • Initial offer was $18 million
  • We thought it should be more like $30 million
  • Maybe we don’t know how to negotiate this
  • At that point we went out and started to seek some serious help
  • Closing price was $28 million
  • We were like a family for 3 or 4 months
  • The price for companies like this aren’t precisely determined
  • There weren’t competitive bidders
  • Jason describes the revenue multiples and the factors affecting the final valuation


Please check back for more on the Vineyard exit, coming soon.

{ 5 comments… read them below or add one }

From LinkedIn January 5, 2014 at 9:58 am

Johnny Spangenberg

Liquidating at the zenith is undoubtedly good for current equity, but is it also necessarily in the long-term interest of the company?

Reply

Basil Peters January 5, 2014 at 10:00 am

Johnny,
I believe that it is in the best long-term interest of the “business”. I am making a distinction between the “company” and the “business” to make it clear that I believe the business will have a brighter future if it is acquired by the highest quality new owner.

In other words, if you sell near the peak, you will more likely be acquired by a company like Google, Cisco or similarly high quality smaller company.

If you wait until the company is past its peak, then the chances are the acquirer will be of lower quality.

Reply

bkotlyar January 6, 2014 at 3:34 pm

This reminds me of an article I read, “3 Most Effective Ways To Increase The Value of Your Company.” It is written by a serial entrepreneur who has bought and sold many companies. It discusses how to make your company more valuable, and it shares secrets that buyers use to acquire companies. Here’s the link to check it out: http://www.freedomexit.com/how-to-assess-and-influence-the-53-critical-factors-buyers-consider-when-determining-your-companys-value/

Reply

Michael Atwell January 30, 2014 at 8:54 pm

Common theme here is to get multiple bidders.

When you get multiple bidders, regardless who is intending on bidding or buying it, it becomes an emotional thing. Potential buyers start throwing the cash around A) as its now a competition, not a business decision and B) because they don’t want to lose out to the other guy.

Generate loads of interest through exposure (obviously you need to have a decent idea or profitable business to begin with), get interested parties to bid against each other (like a traditional property auction) and let them fight it out….Not with their fists, but with their wallets.

Reply

Basil Peters March 3, 2014 at 1:37 pm

Michael, you are absolutely correct. Emotions are a significant factor once there are multiple bidders.

Reply

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