We are preparing for a sale and want to identify which type of buyer (strategic versus financial) will pay the highest multiple based on how they value our automated workflows. How do we run a quantitative assessment of our target buyer profile?

Question

Tyler Smith · Accepted Answer

When preparing for an exit, you must understand that strategic and financial buyers value your business using entirely different methodologies. A financial buyer, like a private equity firm, will typically use relative valuation models, comparing your LTM EBITDA to recent market transactions to determine a multiple. They want to buy your operational cash flow and will look closely at your systems to ensure stability. A strategic buyer, on the other hand, is looking for synergies. They will often use the Income Approach to value your business based on what it is worth in their hands. If they can plug your automated workflows into their massive customer base, they can scale your revenue overnight with near-zero incremental cost. To maximize your valuation, analyze your own team's conative strengths and operational assets. If you have a highly structured, systemized business run by an independent leadership team, you are highly attractive to both. However, the strategic buyer will almost always pay a higher multiple because they can monetize your automation across a larger footprint. Run a quantitative assessment of your automated capabilities so you can pitch the exact synergy value to strategic suitors.