Selling the Intangible Company: How to Negotiate and Capture the Value of a Growth Firm (Wiley Finance)
In Selling the Intangible Company, Thomas Metz helps entrepreneurs and venture capitalists to better understand the process of selling a company whose value is strategic. He addresses all the key issues surrounding the sale of a company in which the value is in its technology, its software, and its know-how–but has not yet shown up on its balance sheet. Filled with in-depth insights and expert advice, this book provides essential information for business professionals and technology CEOs who need to understand the nuances of selling a company with intangible value.
knew they were buying an illiquid stock when they made the investment and if they receive stock in a larger and more successful company, they are better off. Accepting stock puts an additional burden on the seller because now it is becoming a shareholder of the buyer. In this case the seller needs to do some homework to determine the issues surrounding the buyer’s stock. If the stock is publicly traded, is the price a sensible one? Is the price-earnings ratio in line with the industry? If the
prefer an earnout that is based on profits. An earnout based on revenues is simpler to calculate and can be more appropriate if the acquired company does not remain as a standalone entity. If the target becomes a division of the buyer tracking revenues is fairly straightforward. Sellers typically prefer an earnout that is based on revenues because many expense items may not be under their control if the company is partially integrated with the buyer. WAR STORY: A CLEAN AND SIMPLE EARNOUT In
one thing—the company’s value is strategic. The value is strategic because the company has strategic assets such as technology, software, intellectual property, and know-how. This strategic value might also be called intangible value; and a company whose value is intangible is termed an intangible company. An intangible company can be any size, but most have less than $30 million in revenues. These companies are typically in the software, technology, and the service industries. More and more of
may offer two alternatives, not just one. For instance, I might ask for $7 million all cash or $3 million in cash and $6 million in stock. Do not be afraid to ask for top dollar as long as it is still in the ballpark of reasonableness. Sometimes the buyers want to know a ballpark price in order to decide if they should spend the time to consider the deal and to discover if the seller is realistic or not. So I give a range, but it is always a wide range, such as, “The seller is hoping to get $12
Are You Serious? Third-party representation signals to the market that the seller is serious. Buyers have at least some assurance that they are not wasting their time with a tire-kicker. If a potential buyer receives an inquiry from an investment banker, it means the company is being represented professionally. It means they are serious about selling the company. In addition, the deal has been screened; it has passed the muster of the investment banking firm. Buyers do not want to waste time