How to Manage Expectations for Selling Price
In a recent series of interviews, experts in mergers and acquisitions shared some valuable insights on how to ensure a successful transition when selling a company. Based in Luxembourg, these professionals shed light on key aspects of the process that can make a big difference.
Joubin Bashiri, a partner at Tenzing Partners, emphasized the importance of price discovery when assessing the value of a business. Even before signing a non-disclosure agreement, Tenzing works to determine a realistic price range based on various factors like previous transactions and databases. The goal is to find an acquiring firm that sees added value in the selling company, leading to a higher valuation than average.
Bashiri pointed out that industrial groups are often willing to pay more than financial buyers due to the potential for synergies. However, he noted that competition from private equity funds can also influence pricing. He suggested that financial buyers may be a better option for sellers looking for equity capital while maintaining control.
According to Bashiri, sellers are increasingly seeking “smart money” with aligned interests. This means they expect buyers to demonstrate strategic competence that can double the turnover by the exit, potentially resulting in higher revenues and more favorable earnout agreements.
On the other hand, Christophe Bianco, head of sales & bids at Thales, highlighted the role of their corporate VC, Sonea Capital, in driving value creation for a company before its sale. By focusing on profitability and making strategic management changes, the fund was able to improve the performance of the company significantly.
In conclusion, when it comes to selling a company, it’s crucial to consider factors like price discovery, potential synergies with buyers, and strategic value creation. By aligning interests and focusing on smart partnerships, sellers can maximize their chances of a successful and lucrative transaction.
