3 Lessons From a $50 Million Deal.

Welcome back to another edition of The Wise Exit!

I'm Brian Dukes, a Managing Partner at Exitwise.

In today's newsletter, you'll learn:

• 3 lessons from a $50 million dollar deal.

• How long does it take to sell a business?

• Be warned: not all buyers are created equal.

• The winner of the $100 Amazon Gift Card.

Let's dive in ...

3 Lessons From a $50 Million Deal.

Recently, Todd wrote a LinkedIn post about how he turned a $5 million offer into a $50 million deal.

Impressive, right?

You can read the full post on LinkedIn here, but the story goes like this:

A startup founder received a $5 million acquisition offer from a public company. On the advice of Todd, the founder declined. He stated they were building a rocket ship, and they were only in the first inning.

The next day, the CEO personally called with a $10 million offer. Todd then brought in the world's top HR technology investment banker, who had worked with the buyer before.

On the call, the banker highlighted why the acquisition made strategic sense for the buyer. Then, hinted at contacting competitors if an acceptable valuation wasn't reached.

The result? A structured deal worth over $50 million, a 10x increase from the initial offer.

Reading Todd's post got me thinking. There are 3 hidden lessons here that I want to talk about further.

Here we go:

Lesson 1: The Power of Understanding "Why" in Negotiation.

Understanding the buyer's motivations is crucial in any negotiation. In this case, recognizing the strategic value the startup offered to the public company was key to driving up the price.

By identifying why the acquisition was important to the buyer - likely to capture market share before competitors - the seller gained leverage.

Knowing the "why" allows you to frame the negotiation around the unique benefits your company provides. Doing this justifies a higher valuation.

As a founder, always strive to uncover the underlying reasons behind an acquisition offer. Because this knowledge will empower you in the negotiation process.

Lesson 2: Strategic Patience Pays Off.

Patience and strategic timing can make a significant difference in negotiation outcomes. In the story, the founder turned down an initial $5 million offer and even a $10 million offer the next day.

This move signaled that the founder believed the company's value was substantially higher. Saying "no" to early offers can be psychologically challenging. But it's a powerful negotiation tactic. It communicates confidence in your company's worth and can compel buyers to reconsider their valuation.

Of course, this approach requires a keen understanding of your business's true value. But when executed correctly, as seen in the 10x deal size increase, strategic patience pays handsome dividends.

Lesson 3: The Value of Expertise in Maximizing Deal Outcomes.

Never underestimate the importance of having expert advisors in your corner during high-stakes negotiations. In this case, bringing in a top-tier investment banker specializing in HR technology transformed the conversation.

The banker's deep market knowledge, extensive network, and negotiation prowess were instrumental in achieving a favorable deal. An expert who understands your industry, the buyer's perspective, and the art of dealmaking makes a huge difference.

They can identify value drivers, develop creative deal structures, and navigate complex negotiations. The investment banker's involvement turned an unsolicited offer into a $50 million success story. This showcases the immense value experts bring to the table.

There you go - 3 powerful lessons illustrated by a real-world $50 million deal.

What was the biggest takeaway for you?

Let me know by replying to this email. I love hearing from our readers (I personally read every email).

Featured Blog 📰

Have you ever wondered how long it actually takes to sell a business? The answer may surprise you.

While the process can vary depending on many factors, the typical timeline ranges from a few months to a year or more.

Understanding the key factors that influence the duration of a sale can help you prepare for the process and set realistic expectations. From the company's financial performance and reputation to the quality of its assets and management structure, numerous elements come into play.

In this featured blog post, we discuss the 10 most common factors that impact the timeline of a business sale, as well as strategies to expedite the process.

Read the blog post: How Long Does it Take to Sell a Business?

M&A Tips from Brian Dukes 💡

When selling your business, it's crucial to qualify potential buyers to ensure you find the right fit. While it's easy to get carried away by big numbers, not all buyers are created equal.

You must understand the buyer's post-sale plans and seek someone who wants to build on your accomplishments. Research their track record by contacting owners who have sold to them previously. And protect your interests by prioritizing your key employees, brand identity, and communication strategy, not just the highest offer.

Remember, take your time, do your homework, and find a trustworthy buyer to nurture and grow your business.

For more M&A tips from someone who's been there, follow me on LinkedIn.

The Winner of the $100 Amazon Gift Card 🏆

Thank you again to everybody who took part in the two polls in the previous edition of The Wise Exit. Your answers will help us create content that you, the reader, want to read!

Without further ado, the lucky winner of the $100 Amazon Gift Card is …

Robert Berstein!

Congratulations, Robert 👏

I will drop you a message on LinkedIn with instructions on how to claim your Gift Card. Thank you again, and happy shopping!

That’s all for now.

Tune in next Wednesday for another set of M&A lessons, and have a great rest of the week.

Best,

Brian Dukes, Managing Partner