The Highest Offer Doesn’t Always Seal The Deal With Founders

By Sage Duvall

Jul 16 2019

This is a guest article from Founders Advisors President and COO Wesley Legg. We hope you enjoy it!

Cash is King, however, the highest offer doesn’t always seal the deal. This is especially the case when the seller is a founder-based company, i.e., the seller is the founder or an heir of the founder. Founders, of course, want to maximize value, but that is generally not their sole focus, particularly when they are doing a recapitalization with a private equity group. Founders can be focused on a variety of other factors, including certainty of close, reputation/culture or the buyer, expertise and track record of the buyer, the fate of their employees, their role post transaction, business synergies, deal structure, etc. Buyers who are only differentiated by price are at a disadvantage for several reasons, primarily because someone else can always outbid you. Smart buyers seek to understand the desires of the seller and craft their offer accordingly, not just focused on price but also on the seller’s overall objectives in a transaction.

This is another compelling reason for sellers to run a competitive market process. Using an M&A advisor to run a process provides the seller with more options and a higher probability of reaching the terms they desire in deal. It also allows the seller to see buyers side-by-side to compare the different individuals and cultures involved. This is extremely important when doing a recapitalization, because you’re not just seeking liquidity, you’re also picking a partner.

About Founders Advisors

Founders Advisors (Founders) is a merger, acquisition and strategic advisory firm serving lower-middle-market companies. Founders’ focus is on nationwide energy, industrial, SaaS/software, internet, industrial technology, healthcare, digital media, consumer, and value-added distribution companies as well as companies based in the Southeast across a variety of industries. Founders’ skilled professionals, proven expertise, and process-based solutions help companies access growth capital, make acquisitions, and/or prepare for and execute liquidity events to achieve specific financial goals. In order to provide securities-related services discussed herein, certain principals of Founders are licensed with M&A Securities Group, Inc. or Founders M&A Advisory, LLC, both members FINRA & SiPC. M&A Securities Group and Founders are unaffiliated entities. Founders M&A Advisory is a wholly owned subsidiary of Founders.

For more information, visit www.foundersib.com.


Related Posts

“Strategic Combinations”: A Hybrid Deal Structure

Apr 06 2023

By: Billy Pritchard As founders begin to consider various capital transactions for their business, they are often focused on two primary deal structures:  1) selling 100% of the business to a strategic buyer, or 2) partnering with a private equity firm through a recapitalization. Depending on the personal objectives of the founders, as well as […]

Read More…

Managing Buyer Expectations is Key to High SaaS Customer Retention

Mar 26 2019

While I believe high customer retention (and/or low revenue & customer churn, depending how you prefer to frame it) takes a village that touches all aspects of the company…I also believe that sales plays a big role. Particularly when it comes to setting customer expectations. If you have a sales team that routinely overpromises, you are […]

Read More…

What Enterprise SaaS Customers Want

Apr 25 2019

Some SaaS companies start by selling to the SMB market and evolve to sell to the enterprise at some point. Often this move is a planned strategy. And other times, it’s more accidental. Enterprise customers actually lead you there. You’re targeting small and mid-sized businesses and suddenly you notice that you have some Fortune 1,000 […]

Read More…