Exit Execution Workshop (Philadelphia) Part 8: Maximizing the sale price
This is the eighth in a series of eight posts on Exits Execution – the Philadelphia Series. In the session that may be of the greatest interest to founders looking to sell their companies, Basil discuses several techniques for increasing the sales price.
The Exit Execution series follows the Exit Preparation presentation and Exit Strategies – The Waterloo Series available on the exits.partners blog.
The Exit Execution workshop was first presented at the Angel Capital Association Annual Summit in Philadelphia on May 9, 2016.
EXIT Execution – THE Philadelphia SERIES
PART 8 – MAXIMIZING THE SALE PRICE
There are many ways to maximize the sale price of a company. Here are a few:
1. Increasing the growth rate: Excellent investment bankers will often invest several quarters advising the company implementing strategic and operational improvements to increase the growth rate. This is the single best way to increase the sales price. The valuation for many companies is based on a multiple of revenue or cashflow. The multiple increases with the growth rate.
2. Make financial changes: Restructuring the balance sheet, structuring the transaction to be more tax-efficient, and optimizing the balance sheet, are a few of the ways to extract more value.
3. Illuminate strategic value: As part of the preparation for the exit, the investment bankers should work with the company to identify the value propositions that make the company attractive to buyers. There may be new sources of value which come to light. Recently, Strategic Exits Partners has developed thought leadership around the role that exit advisors can play to work pro-actively with the company in developing their product, marketing and IP strategies to build value.
4. Maintain multiple bidders: Strength in negotiations comes from having viable alternatives. Maintaining multiple bidders allows the company resist tactics from one potential buyer by having alternative buyers to negotiate with.
5. Use your negotiating skill: Skilled negotiators can often increase the final selling price by 50%. Most acquisitions are covered by an NDA so the details are not available. In general terms, if the advisor can find ways to increase the company’s value while better meeting the buyer’s objectives, s/he may be successful.