Approached by a Strategic Buyer - thoughts?

by a searcher from Harvard University - Harvard Business School

Mar 10,2023

Anonymous for NDA reasons, but I'm an operator (former successful self funded searcher) who has been approached by a Strategic acquirer who owns one of our main competitors. Our company is a Compliance related tech-enabled services business with strong recurring revenue and no assets/Capex. We'll hit EBITDA of ~$500k (unadjusted) end of this year and the Strategic is probably 15-20x larger than us.  If we combine, they'll get client/geo expansion, price uplift, cross-sell, and cost-out synergies (plus the EBITDA of course). I am interested in selling since this could mark a good exit (and would very beneficial for our current employees as well)

Main question is what sort of transaction price/exit multiple should we aim for? Any thoughts or watch-outs on negotiating with them? How can I protect my employees? I'm humbly requesting any input or advice because these guys are much larger and I'm worried they'll lowball or take advantage of a young inexperienced operator.

Thank you!

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17 comments

searcher

Congrats on the opportunity. Happy to hop on a free cal to discuss options and advice.

03/13/2023 | like reply | 0 likes

searcher from New York University - Leonard N. Stern School of Business

First off - nice work on building something that is attracting strategic interest! I agree with the other comments that advocate bringing on an advisor. However, I would not necessarily move into a full blown auction process. I would get an independent view on fair value, and if you can extract an appropriate “preemption premium” on this, I would proceed with this buyer and see where it goes. Let them know that you are considering having a process run, to try to keep them honest. If you decide to run a process, this buyer quite possibly will participate and you might not lose them but (1) your “confidential” information is going to be spread all over the place and (2) you might get higher bids that request exclusivity and end up re-trading down later. Hitting the “launch” button on a process is a big deal - I think it’s worth exploring a bilateral deal before that. I spent a lot of my career as an investment banker before moving to the buyside, so have seen both sides of this. I’m happy to chat about this - just send me a DM.

03/13/2023 | like reply | 0 likes

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