We are trying to decide whether to run our exit process targeting strategic buyers who value our technology or financial sponsors who focus strictly on EBITDA multiples. How do we use our Value Growth Audit to determine which buyer type will offer the most favorable deal structure and highest cash at close?

Question

Tyler Smith · Accepted Answer

Choosing between a strategic buyer and a financial sponsor requires a realistic assessment of what your business actually has to offer. You must use your Value Growth Audit, or VGA, to objectively analyze whether your primary value lies in your standalone cash flow or in your proprietary assets. If your VGA reveals that your greatest strength is your highly efficient operating system, predictable cash flow, and an independent leadership team running on EOS®, a financial sponsor is often your best target. Sponsors buy companies to run them as platforms. They will value your structured processes and leadership stability, and they will likely offer a clean structure with some rollover equity to keep your team motivated. On the other hand, if your VGA highlights proprietary technology, unique intellectual property, or a highly specialized customer niche, a strategic buyer will likely pay a much higher multiple. Strategics buy to integrate. They care less about your back-office systems and more about how your technology or customer base can scale across their existing infrastructure. However, strategic deals often come with more complex integration requirements and transition service agreements. By using the data from your VGA, you can align your exit strategy with the right buyer type. This ensures you do not waste time pitching operational stability to a strategic buyer who plans to gut your back office, or pitching proprietary technology to a financial sponsor who only cares about your historical EBITDA.