Advanced. Understanding the buyer's motive tells you what your company is worth to them, and to whom.
12 min read · Level 5
The same company is worth very different amounts to different buyers, and the difference is about their strategy rather than your metrics — which means who you talk to matters more than the multiple. The best outcomes almost always involve buyers who have known the company for a year or more, which makes this something to understand early and act on much later.
Acquirers buy for a small number of reasons:
Technology — faster or cheaper than building it Team — the people, often with the product shut down (an acquihire) Customers — your customer base or contracts Revenue — you add meaningfully to their numbers Removing a competitor — you are taking their market Entering a market — you are a route into a segment or geography
The motive determines the price and the structure.
Because the same company is worth very different amounts to different buyers, and the difference is about their strategy rather than your metrics.
A company worth $8M as a revenue multiple might be worth $40M to a buyer for whom it unlocks a market or removes a threat. Knowing which buyers hold which motive is most of what determines the outcome.
The scheduling company, $2M ARR, approached by three potential buyers:
A logistics software incumbent. Motive: removing a competitor and gaining the customers. They can absorb the product into their suite. Likely to pay a strong multiple because it defends their position.
A large HR platform. Motive: entering the logistics vertical. Your customers and domain knowledge are the asset. Price depends on how strategic that vertical is to them.
A private equity firm. Motive: financial returns. They pay a multiple of profit, not of strategic value. Usually the lowest number of the three, and the most concerned with margins.
Same company, three very different valuations — and the founder who understands this approaches the strategic buyers first.
On acquihires: the buyer wants the team and shuts the product. Sometimes a soft landing for a company that is not working. ⚠ Watch the liquidation preference — in a modest acquihire, investors' preferences can consume most or all of the proceeds, leaving founders with retention packages and common shareholders with nothing.
First-time founders often think of acquisition price as a function of their revenue alone. Strategic value routinely dominates, and that means the buyer matters more than the multiple.
The second mistake: no relationships with potential acquirers until a process starts. The best outcomes usually involve buyers who have known the company for a year or more.
The third: not understanding what the preference stack does to a modest exit. Founders discover at signing that a $12M sale returns them very little.
Group by motive. Strategic buyers pay more than financial ones, consistently.
Partnerships, integrations, conversations. The best outcomes come from buyers who already know you.
The same company has several different values depending on what it unlocks for the buyer.
Run realistic sale prices through the preference stack before any conversation gets serious.
Take advice before responding substantively to any approach.
A company that is clearly growing is worth more and negotiates better. The best position is not needing to sell.
Understanding this is useful early; acting on it belongs much later, or when an approach arrives.
Do not organise your company around being acquired. Building for an acquirer rather than for customers produces a company neither wants.
A company worth a modest multiple of profit to a private equity buyer can be worth several times that to a competitor defending a market or a platform entering one. The asset being bought is different — earnings in one case, position in the other — and so is the price.
Group potential buyers by motive before approaching anyone. Strategic value routinely dominates financial metrics.
In a modest acquisition, accumulated liquidation preferences can consume most or all of the proceeds, leaving founders with retention packages and common shareholders with very little. Founders frequently discover this during the closing process rather than years earlier.
Model your own outcome at a realistic sale price now, not when an offer arrives. It changes how you think about every subsequent round.
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