We are being valued on a standard trailing twelve-month EBITDA multiple by financial buyers, but we believe a strategic acquirer will pay a premium based on our proprietary software integration. How do we use the Market Approach under IVS 105 to defend a synergistic premium?

Question

Tyler Smith · Accepted Answer

Financial buyers look at your business through a rear-view mirror, valuing you on historical EBITDA and industry-average multiples. A strategic buyer, however, values the future cash flows they can unlock by plugging your proprietary software and systemized processes into their larger distribution engine. To capture this premium, you must shift the conversation to the Market Approach under IVS 105, focusing on synergistic value.

Start by identifying the exact operational efficiencies the strategic buyer will gain. Under IVS 105, you can construct a pro forma valuation that quantifies these synergies. Map out how your automated workflow will reduce their customer acquisition costs, eliminate redundant administrative seats on their Accountability Chart, or speed up their delivery cycle.

Present this data as a joint-value creation model. If your software allows them to scale their existing customer base without adding overhead, calculate that specific margin expansion. Show them that while your standalone EBITDA is one number, the value of your business inside their system is significantly higher.

Negotiate a split of this synergistic value. Instead of accepting their baseline multiple, use your pro forma models to demand a premium multiple that reflects a portion of these post-close savings. This moves the negotiation away from historical performance and forces the buyer to pay for the operational leverage you are delivering on day one.