The Real Reason Buyers Say Yes in M&A
Buyers do not make decisions based on how price is talked about in the market.
What we recommend instead is developing a clear story for every potential buyer.
That story should focus on what happens when your company is combined with theirs. It should answer questions like: will it bring in new customers, introduce new products to their existing customers, reduce costs, or add meaningful talent to their team?
These are the reasons a larger company, or even a peer, will seriously consider what the impact would be of bringing your business into their organization.
What that story does not include is the multiple of last year’s EBITDA that someone might pay for your business.
That is intentionally not part of the conversation.
A multiple of EBITDA is often used after the fact to describe a deal, but it is not how a buyer decides what to pay.
Both the multiple and the EBITDA itself are negotiated numbers. There is negotiation around how past performance is interpreted, and then further negotiation around what multiple makes sense to describe the outcome.
When a buyer is actually deciding what to offer, both in price and in terms, their internal conversation looks very different.
They are asking themselves what kind of return they can generate on the capital they are putting at risk.
They are thinking about what happens after the acquisition.
They are considering questions like:
What will sales look like once the two companies are combined?
What will expenses look like?
What staffing changes will be needed?
What additional value can be created through cross-selling?
What marketing opportunities could amplify the combined business?
The focus is not on what happened last year. It is on what could happen over the next five years that would justify the investment.
If the only question a seller asks is, “Do you want to buy my company?” then they are not part of that forward-looking conversation.
And if you are not part of that conversation, you have little influence over the outcome.
To influence price, you need to be involved in how the future is being defined.
The question is not whether someone wants to buy your company, and it is not what multiple they are willing to pay.
The real question is: what impact would combining our businesses have on yours?
What could we achieve together in sales?
What could we improve in terms of cost structure?
How could we bring together the strongest parts of both teams to create something better than either company could build alone?
When you can lead that conversation, even by helping the buyer imagine it, you put yourself in a stronger position.
You become part of the discussion happening inside the buyer’s organization, where they are evaluating the return on investment and deciding what the opportunity is truly worth.
That is where pricing is actually determined.