Questions

We're a renowned and profitable SAAS travel business, but our banker can't find the right buyer, is this a common issue?

We would continue with fast growth but need to exit for personal reasons. Where would you go from here to find a buyer? Very grateful for any answers.

6answers

Naturally 1001 variables play into this that I'm blind to but here are some assumption laced thinking points:

You're profitable, upwards trending, business, in a very competitive vertical. Yes?

You guaranteed have a Buyer, unless:

1. Your asking price is outrageous. Not likely as we've closed strategic sales that were 12x revenues. It doesn't get much more aggressive than that.
2. There aren't enough strategic or institutional buyers. Nope. The buyer market is wide with creative outreach. We've rarely tapped let's say 20% of our pool before successfully securing multiple qualified offers. (And we hold a 100% close rate).
3. You're so big ($1B+) that only a few have an opportunity to buy you AND they don't like you or your brand. Unlikely?

More likely...

4. The outreach effort is nominal. Most brokers and M&A intermediaries boast a sub 40% closing ratio and far too many of them are "listing agents" -- whereby they list a property, announce it to a pool of buyers in their database and then "wait". We've seen deals that we normally turn around in 60-days with all-cash offers, take 18-months for "payment plan" deals closed by other firms. The results based on the experience and model employed is indeed apples to oranges.
5. How your business is presented (packaged) is not producing conversions. This too would then be a fault on your banker's side. We "spy on" the competition - it's business as usual on our end - and the typical prospectus and marketing collateral and followup materials are, well, embarassingly slim from, well, everybody.

I've never encountered a problem with "the market" (the strategic buyers) and we've sold very niche and distressed properties.

We have declined taking on deals where the asking price was a number picked out of la-la-land (in which case we offer complimentary guidance, feedback and let them pursue other avenues for closing the deal - which basically never happens at that asking price)... but that's a sensible discussion and likely one that was already had.

If your exit is sub-$100M, your asking price is reasonable (even if aggressive), your business is indeed strong on its metrics, growth and brand value -- then any lack of offers sits with your banker.

You're likely looking to play professional basketball but you brought in a kid from a high-school team. Skills mismatch. Upgrade your "player" and you'll move towards a win quite rapidly.


Answered 2 years ago

Bankers... Last people I engage to sell my business.

My guess is you could randomly call almost anyone on Clarity + they'd have many great ideas for selling your business.

First place I'd look is competitors + users of your service.

In fact I have a Travel Business client who likely has far more income than any of the SAAS companies they use to pull data streams from to populate their offers.

Competitors + users are your best first stop.

Keep in mind, if you sell your business directly to someone, you pay no broker fee either.

Next stop is to list your site on Flippa.

A round about way to sell your business, is to start a Kickstarter project to acquire a round of money. This allows you to publicize your business to many people. One of them might buy you out or pass along a referral of someone to buy you out.

Think of ways to sell your business... outside the box... where you pay no broker fee + how you advertise (like Kickstarter) doesn't seem like advertising, which will likely net you far more money.


Answered 2 years ago

I've been through multiple acquisitions in my career, and navigated them for other founders as well.

Your scenario is not uncommon. There are many issues that affect an acquisition. The biggest one, assuming most elements look positive, is timing for the acquirers.

In your landscape of SaaS travel businesses there are always big players who might be (1) able to buy you, (2) willing to buy you, and (3) need to buy you. But...they may have a 3rd party service that works well and they don't feel a need to own more proprietary software - there's no measurable gain to them for doing so. They may want to buy a company like yours, but feel there are other cheaper/better/fill-in-reason options. And of course the killer: they just acquired some other company with enough similar features that it now doesn't make sense to buy you, too.

You mention needing to exit for personal reasons. This may also be playing into your trouble on two counts. First, this puts you at a disadvantage when negotiating; you could be "playing scared". Second, when a large company acquires another company they fully expect the founders, execs, and typically the bulk of all employees to stay on for 1 to 3 years. This provides transition, continuity, and often brings an entrepreneurial boost back into the "mother ship".

If any of those things is clouding the conversation, then you will need to evaluate that with your team. Speaking of your team, if you all are really stuck on a certain acquisition number then that can also spoil things. You say you "need" to exit. So if that's true, then accept any number that gets you to break-even. A number larger than that is gravy. Waiting on your dream number is, in this case, not advisable.

I'm happy to jump on a call to talk specifics and figure out how to plan your way forward with you.


Answered 2 years ago

I think Rob Toth's answer is spot on. Bankers do not often give feedback in a candid and constructive fashion, so there may be marketing or business concerns that you are unaware of. It is uncomfortable and challenging to keep the mandate after telling someone they have an "ugly child".
Bankers should be willing to share their outreach list so it should give you a better sense of how broad or targeted the marketing has been. While you have retained a professional to manage the process, the best outcomes often require collaboration and involved sellers.


Answered 2 years ago

Why get your banker to advise on the sale of the business? Seems you're using the wrong advisor.
Finding a buyer for any service (or a business) begins with YOU knowing the obvious purchasers....

I sold my business last week (seriously, yes) and I started by researching other firms in the same and adjacent marketplaces. Then I sent them this email.

The owners of XXXX have put the business up for sale. If you would like to find out more with a view to buying it as a going concern, please get in touch before 12 December 2017.

We would count it as a personal favour if you could refrain from sharing this information outside your organisation.

Many thanks.

I got 6 enquiries, got 5 NDAs signed, and proceeded to negotiations with two and sold to one....

I brought the lawyers in late in the day, once we had agreed a heads of terms. I knew the price I wanted and they told me during negotiations what they valued the firm at and we haggled....

And so my advice is to first find possible buyers by approaching them direct. Then bring in advisors. NOT your banker (he's good for banking.... not business sales).

Go for it.


Answered 2 years ago

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