A strategic buyer wants to acquire us to expand into our geographic market, but they are offering a financial sponsor multiple based strictly on our historical standalone performance. How do we build a synergy model that proves the value of our plug-and-play operations to extract a strategic premium?

Question

Tyler Smith · Accepted Answer

Strategic buyers should pay a premium multiple because they can unlock synergies that financial sponsors cannot. However, they will always try to buy you at a financial multiple and keep the value of those synergies for themselves. To force them to pay for that strategic value, you must model and present the synergies yourself.

Start by identifying the cost synergies. If the buyer has an existing back-office infrastructure, they can likely eliminate redundant administrative costs in your business, such as accounting, HR, and legal fees. Use your Accountability Chart to show which roles can be consolidated, and calculate the exact dollar savings.

Next, model the revenue synergies. If the buyer can sell your products to their existing customer base, or if you can introduce their services to your clients, project that revenue growth. Be realistic but concrete, using your historical conversion rates and customer acquisition costs as the baseline.

Once you have calculated the total synergy value, do not just hand it over. Use this data during negotiations to argue for a higher multiple. Show the buyer that your operational systems are plug-and-play, meaning they can integrate your company quickly and realize these savings in year one. By demonstrating that you understand the combined value of the two companies, you can push the buyer to split the synergy savings with you, reflecting that value in a premium purchase price at closing.