How do you sell for the highest and best value

What determines value?

  • Expectation of Future Earnings
  • Competition
  • Strategic fit
  • The eye of the beholder

What supports the expectation of Future Earnings?

  • Historical profitability
  • Projected profitability; supported by
    • Strong management
    • Backlog
    • Pipeline
    • Perceived customer demand
    • Secure customer relationships
    • Growing market
    • Competitive position
    • Scaleability
    • Proprietary technology or knowhow
    • Economic outlook
    • Synergies with the buying entity
    • Opportunities for cost savings and efficiencies
    • Identified growth opportunities
      • Within existing customers within existing markets
      • With new customers in existing markets
      • With new customers in new markets
      • New products in existing markets
      • New products in new markets
    • Post-acquisition value-add by buyer
      • Expertise of buyer to achieve financial engineering
      • Addition of professional management
      • Add-on acquisitions
      • Customer relationships
      • Strategic alliances
      • Strategic vision

How do you estimate value?

  • Net Present Value of Future Earnings
    (DCF: Discounted Cash Flow)
    • Proforma income statement projections
    • Year-over-year EBITDA for future years
    • Hypothetical sale
    • Discounted back to present value
    • UNDERPINNED BY ASSUMPTIONS
  • Multiples of adjusted* EBITDA – A PROXY
    • Based on comparable sales
    • Based on payback
    • Based on perceived future earnings
    • Based on buyers’ perceived future value creation

How do you achieve highest and best value? THE PROCESS

It’s not who you know, its not what you know, its how you manage the process

  • Research and understand market movements and competitive dynamics
  • Cast a wide net
  • Look for strategic fit
  • Competition
    • Via the “invisible auction”
  • Controlling communication and information exchange
  • Sequencing the process appropriately
  • Keeping suitors on even pace
  • Avoiding exclusivity as long as possible
  • Don’t let buyer get too close – keep the new car smell
  • Deal structure
  • Knowledge of the process and structure to avoid haircuts
  • Knowledge of the process to avoid claw backs
  • Ownership structure
  • Post-transaction integration
  • Strategy and execution

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