We have received two competing letters of intent: one from a private equity firm offering a standard EBITDA multiple and another from a strategic competitor offering a complex structure with a higher face value but massive operational conditions. How do we use the IVS 105 Market Approach to evaluate and leverage these offers?

Question

Tyler Smith · Accepted Answer

When facing competing offers from financial and strategic buyers, you must look past the headline purchase price and evaluate the structural reality of each deal. A private equity buyer is looking for a platform or an add-on, while a strategic competitor is looking for synergies, market share, and intellectual property.

Under the IVS 105 Market Approach, you must analyze the underlying value drivers for each buyer type. The private equity firm will likely value your business based on a market multiple of your current, normalized EBITDA. This is a clean, cash-heavy transaction, but the multiple may be capped by industry standards.

The strategic buyer, however, can justify a much higher multiple because they plan to eliminate duplicate administrative costs and integrate your automated systems across their larger customer base. This is why their offer has a higher headline number. However, they often hide this risk-sharing in complex earnouts, retention requirements, and restrictive non-compete agreements.

To leverage this, use your EOS V/TO® to clarify your absolute walk-away number. Present the strategic buyer's high valuation to the private equity firm as market evidence of your company's strategic value under the Market Approach, pushing them to raise their cash multiple. Simultaneously, demand that the strategic buyer simplify their structure, converting their performance-based earnouts into guaranteed installment payments or an upfront cash premium, using the financial buyer's clean cash offer as your leverage.