We are negotiating with a strategic buyer who can easily double our sales by plugging our product into their distribution channel, but they are valuing us based strictly on our standalone EBITDA. How do we extract a portion of these post-close synergies to negotiate a higher multiple?

Question

Tyler Smith · Accepted Answer

Strategic buyers acquire businesses because the combination of the two companies is worth more than the sum of their parts. Under IVS 105, this is known as Synergistic Value. If a buyer can immediately scale your product across their existing customer base, they are capturing massive value, and you deserve a share of it.

To extract this premium, you must build a credible model of the post-close synergies. Do not rely on vague assertions. Calculate the exact margin expansion, distribution savings, and cross-selling revenue that your systems will enable for the buyer.

Present this data as a joint-value creation bridge. Show the buyer that while your standalone valuation is based on a standard multiple, the synergistic value justifies a premium multiple because of the low-risk growth they are buying.

If the buyer remains stubborn, use this synergy model to structure a structured payout. Propose a higher overall enterprise value where the premium is structured as a contingent payment or a performance-based milestone tied directly to the integration's success. This aligns both parties' incentives. By proving you understand their economic upside better than they do, you shift the negotiation from a defensive defense of your historical EBITDA to an offensive share of their future profits.