Have you ever heard the phrase, “Great companies are bought, not sold”?
This week on Built to Sell Radio, we interviewed Seth Godin, renowned entrepreneur, legendary marketer, best-selling author, and speaker, who explained that focusing on attracting the attention of an acquirer is the key to fetching a premium for your business.
Seth, who sold his first business, Yoyodyne, to Yahoo! at the height of the late ’90s’ Internet boom, referenced another Yahoo! acquisition to prove his point. When Yahoo! bought Mark Cuban’s Broadcast.com for $5.7 billion, Yahoo! wasn’t basing their offer on a multiple of profit. Instead, Yahoo! was looking to incorporate Broadcast’s streaming services into their online portal, which was popular at the time. Yahoo!’s portal was a cash cow, and Broadcast’s streaming assets would make it even more valuable.
The key to getting an above average multiple from a strategic acquirer is to stop thinking about your multiple and to start thinking about theirs. Make your business into a key that unlocks a treasure chest for an acquirer, and your business will become so irresistible to them that an acquirer will come to you, giving you the negotiating leverage you need to drive up the price beyond industry standard multiples.
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Quote of the Week
“Great transactions happen because businesses are bought, not sold.”
– Seth Godin
Clip of the Week
In this clip, Seth explains how to position your company to be acquired rather than having to sell it.
Deals
- Noname Security, a company that protects application programming interfaces (APIs), has been acquired by Akamai Technologies, Inc. (NASDAQ: AKAM), a company that focuses on cloud services to enhance online experiences and security. The purchase price is set at $450 million, valuing Noname Security at nearly four times its last year’s revenue of $116.6 million.
- Lexion, a company that creates software using artificial intelligence to help manage and organize business contracts and agreements, will be acquired by DocuSign (NASDAQ: DOCU) for $165 million in cash. In 2023, Lexion’s revenue was around $13 million, setting the acquisition price at just over 12 times its revenue.
- Bren-Tronics, Inc., a company focusing on energy storage solutions for applications, is set to be acquired by EnerSys (NYSE: ENS), a company that makes batteries and energy storage systems, in a $208 million all-cash deal. This acquisition price values Bren-Tronics at approximately 8.7 times its adjusted EBITDA for the year ending December 31, 2023.
