A strategic buyer is offering a revenue multiple while a private equity group is offering an EBITDA multiple based on a platform roll-up. How do we evaluate these two competing valuation methodologies to determine which structure leaves us with more cash after paying off transaction expenses?

Question

Tyler Smith · Accepted Answer

Evaluating a revenue multiple from a strategic buyer against an EBITDA multiple from a financial sponsor is not just about comparing headline numbers. It is about understanding the structural risk and the reality of your post-close cash. Strategic buyers look for synergies and often offer higher multiples because they plan to gut your overhead. Financial sponsors value your operational independence and want to use your business as a platform to buy smaller competitors.

To determine which deal leaves you with more cash, you must run a side-by-side net walkaway analysis. A high revenue multiple from a strategic buyer often comes with golden handcuffs, long transition periods, and significant integration risks that can threaten your earnout. Conversely, a private equity platform deal might offer a lower initial multiple but include valuable rollover equity.

Use the Step by Step Exit Business Integration Review to assess your leadership team's readiness for both scenarios. If your Accountability Chart shows that you have a strong, self-sustaining leadership team that GWCs their seats, you are highly attractive to a financial sponsor who will pay a premium platform multiple and leave you in control.

If your team is highly dependent on you, a strategic buyer might be your only viable option, but they will structure the deal to force you to stay. Calculate the true cost of these structural demands, including tax implications of asset versus stock sales, before making your final decision.