For many business owners, selling their company means cashing out and moving on. But what if the biggest financial opportunity comes after the sale?
This week on Built to Sell Radio, Adam Kerrigan shares how he sold his managed service provider (MSP) business for 1x EBITDA, rolled a portion of his equity into the acquiring company, and ultimately positioned himself for a potential payout of 15x EBITDA down the road.
While the exact valuation multiples vary by industry, the trend holds true almost universally:
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Smaller companies typically sell for lower multiples. In the MSP industry, Adam said businesses with under $1 million in EBITDA often trade for 2 to 4x EBITDA, reflecting their higher risk, reliance on the owner, and lack of scale.
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Larger companies command much higher multiples. In MSPs, Adam described how businesses with $10 to $20 million in EBITDA can attract 15x or more, driven by their scale, recurring revenue, and lower perceived risk. This dynamic applies to nearly every industry—bigger businesses generally fetch higher multiples.
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Rolling equity bridges the gap. By reinvesting part of the proceeds from a lower-multiple sale into a larger organization, you can potentially benefit from the higher valuation of the combined entity when it sells.
Adam’s story highlights the promise—and the risks—of valuation arbitrage. To make the most of this strategy, he suggests:
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Ensuring the first bite is enough. The cash portion of your deal should provide financial security as the second payout is never guaranteed.
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Carefully vetting your buyer. A buyer with a strong track record and aligned goals increases the odds of a successful outcome.
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Understanding the timeline. While the larger payout is enticing, it may take years—or might not materialize at all.
Adam’s journey underscores a principle that transcends industries: Valuation arbitrage can turn a modest sale into a life-changing financial event when executed well.
Catch the full episode to learn how to position your business for a strong first sale—and an even better second one.
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Deals
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SafeSend, a cloud-based provider of tax automation software, has been acquired by Thomson Reuters Corporation (NYSE/TSX: TRI) for $600 million in cash. Founded in 2008 and based in Michigan, SafeSend helps tax and accounting professionals streamline processes like tax return assembly, review, e-signatures, and delivery. The company’s solutions are used by accounting firms across the U.S., including 70% of the top 500 firms. SafeSend is projected to generate $60 million in revenue in 2025, with the acquisition price reflecting a revenue multiple of approximately 10.0 times.
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