Selling a Business for 50% More – Case Studies

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.

9 thoughts on “Selling a Business for 50% More – Case Studies”

    1. 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.

  1. 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:

  2. 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.

    1. Hi Natalie,

      I agree with you – I’d also like to see more examples of pre-revenue exits. The challenge is that almost all exits are covered by non-disclosure agreements. I’d be grateful to anyone who has a case study they are able to share.

  3. I think it is always important to keep in mind that absent multiple bidders, the entrepreneur must keep in mind that he/she is also a bidder. If you want to sell rather than need to sell, all offers are judged against the status quo and the money you can pull out… This is often lost on the entrepreneur and the M&A team… which of course are incentivized for a transaction of course. I have been through this 3 times…and getting ready for my 4th exit in 35 years of business. Being stoic is not a bad strategy for life and negotiations.

    1. Excellent point, Jaffer. You are of course, correct, but I’d suggest developing a clearer strategy before starting an exit process. When you have completed your exit, let’s connect and then compare the relative merits of stoicism compared to the post-exit feeling :-)

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