We have a massive valuation gap with a strategic buyer who wants our proprietary delivery software but does not want to pay for our entire operations. How do we structure a technology licensing deal and spin off our core service business to maximize our total proceeds?

Question

Tyler Smith · Accepted Answer

When a strategic buyer only wants your technology, forcing them to buy your entire services business will result in a heavily discounted multiple on your services revenue. Instead of trying to sell everything in one package, structure a transaction that splits the assets to capture the maximum value of both.

First, execute a corporate carve-out. Spin off your proprietary software into a new, separate legal entity. Next, structure a deal where the strategic buyer purchases this software entity at a high technology-level multiple, or enters into an exclusive, long-term licensing agreement with an upfront buyout option.

Second, retain ownership of your core service business. Because your service operations are already running on EOS, you do not need to be involved in the day-to-day work. Ensure your Accountability Chart has a capable leadership team that GWCs their roles to run the service business independently. This allows you to continue collecting high-margin cash flow from the service company or prepare it for a separate sale to a financial buyer who values steady service revenue.

In the transaction agreements, make sure you negotiate reciprocal, non-exclusive transition service agreements. This guarantees that your service business still has the right to use the software on favorable terms, while the strategic buyer gets the technology they want without the operational headache of managing a service team. This structural split bridges the valuation gap by unlocking the independent value of both assets.