Pricing of Strategic sales vs Financial sales for business owners
The recently released survey sponsored by Exitrak LLC, clearly shows some key differences in sale prices for both strategies – we have long favoured securing a strategic exit for business owners as one of the ways most likely to achieve a higher sale value – the survey shows this is the right strategy for most business owners. Importantly, the survey concludes that less than 25 % of completed transactions were strategic sales.
The key aspect/s of a strategic sale listed by 85 % of respondents was ( in order ) :
Complementary product line ( s ) or suite of services – 36 %
Market niche – 25.3 %
Geographic location – 17.3 %
Key customers – 6.7 %
Technology, including personnel infrastructure – 5.3 %
Strategic sales outperformed financial sales in the frequency with which the sellers target price was met or exceeded for 58.6 % of the sample. Interestingly strategic sales multiples exceeding those in financial sales by at least 25 % accounted for 53 % of the sample transactions.
Our analysis of this survey data concludes that for deals under $5m it is highly likely that a strategic private company sale will yield a higher price ( often a significantly higher one ) than a traditional financial sale. The return more than justifies the investment of time and resources by the ownership / management to build the company into an attractive strategic acquisition candidate.