We want to maximize our enterprise value multiple, but we have two distinct business units with different margins. The buyer wants to blend our multiples downward. How do we use a divisional spin-out or strategic asset sale to capture peak multiples for both units?

Question

Tyler Smith · Accepted Answer

If you run two distinct business units under one legal entity, such as a high-margin software service and a low-margin consulting division, a buyer will try to blend your valuation multiples downward. They will apply a single, lower multiple to your entire EBITDA, which costs you millions of dollars in enterprise value.

To capture the maximum value for each division, you should consider a divisional spin-out or a strategic asset sale before going to market. This means legally separating the two units into distinct corporate entities with their own balance sheets, P&L statements, and operational teams.

Use your EOS Accountability Chart to cleanly divide the roles and responsibilities. Ensure that each entity has a dedicated leadership team that GWC, gets, wants, and has the capacity to run their respective operations. This eliminates the operational overlap that buyers use to justify a discounted multiple.

By presenting two clean, independent businesses, you give yourself the option to sell them to different buyers who specialize in those specific sectors. A strategic software buyer will pay a premium for the software unit, while a services-focused buyer will pay a fair multiple for the consulting business, maximizing your total exit proceeds.