Mike Lyon’s Post

The maximum point of leverage for a founder negotiating a transaction is right before closing the deal (or right before granting exclusivity). It's at this point of maximum leverage that founders should try to finalize the negotiations on key terms of the sale. If you move too early, a buyer is more likely to say "no way" and pass. But if a buyer has already committed significant resources for evaluating a deal, the founder is in a better position to negotiate. #founders #pathtoexit

After Sarah Rowell and Scott Mackenzie spent five years increasing Kantola Training Solutions' revenue, client retention, and learner engagement, they saw the market starting to consolidate and decided to make a strategic move to maximize value; either through acquisition or being acquired. You can read Sarah and Scott's own account of how they worked with Vista Point to achieve an optimal exit here: https://lnkd.in/gEVs9vVS #tech #saas #investmentbanking #privateequity

Without fail, the due diligence phase of selling a business demands the most attention and energy from a founder. The more prepared a founder is in getting their legal and business materials in order, the smoother diligence goes. To help make the process easier, our team put together a checklist of the most important materials a founder and his team should keep organized in preparation for diligence. Click through the article below to see the list. Link: https://lnkd.in/g4QbpRh3 #founders #pathtoexit

A competitive M&A process is one where a founder has multiple bidders working against each other to win a transaction. This competition can help you get a higher valuation, better transaction structure, faster timeline to close, and a higher probability of close. Here are a few things founders should know about running a competitive process. Read the full article to learn more: https://lnkd.in/gg9xBvS3

Any time that you spend with buyers who aren't a good fit takes away from time with buyers who are. Different buyers have different filters for evaluating businesses and different models for growing businesses. Consequently, some will be better fits than others. Since bankers have repeated interactions with the various buyers, they can help you prioritize whom to spend time with. #founders #pathtoexit

Creating a buyer list should be a collaborative effort between a founder and their banker. A bank can broaden the buyer universe in a couple ways: 1. Manage competitors in the process Often founders don't want to include competitors in the process, for strategic or emotional reasons. But these competitors can be really good buyers because they already know your market and usually have strong synergies. Of course, you want to be careful about sharing proprietary information with a competitor. A bank will help you know how and when to share data so you don't jeopardize your position. 2. Provide access to buyers you hadn't considered. Founders often already have relationships with prospective buyers, but that universe is relatively small. The majority of qualified buyers will be completely off a founder's radar. For example, a founder may not realize that a certain strategic buyer has an interest in the founder's sector, even though that buyer currently does little if anything in the founder's market. A bank knows the relevant parties and can invite the best players to participate, beyond what a founder would normally include, which: * Increases competition in a transaction * Increases the likelihood of finding a good fit #founders #pathtoexit

50-60% of the transactions we execute for founders involve an equity recapitalization. With a minority or majority recap, the PE firm pays cash in exchange for equity (as opposed to adding capital to the balance sheet). This option allows founders to both: * Take some chips off the table (i.e. receive some liquidity today) * Maintain a significant amount of upside in the go-forward business Taking this approach is becoming more and more common. As mentioned, 50-60% of our deals play out this way because of the dual benefit of liquidity and future upside. So if as a founder you're hesitant to transact because you don't want to give up future upside, but you also want liquidity, this approach may be right for you. #founders #pathtoexit

Is anything more important to a founder than valuation? Valuation is of course important when taking on investment, but the structure of the securities you sell to an investor can have a large impact on your ultimate outcome. As a founder, you should watch out for terms like "participating preferred" and "dividend rights." These terms can materially affect exit economics down the road. So even when valuation is attractive, if a deal is structured to favor the investor, then what may appear like a great outcome for the founder may actually be a poor one. #founders #pathtoexit

Valuation is understandably one of the most top-of-mind topics founders want to cover in our conversations. Something we often emphasize is that there are two sides of valuation: the objective side based on core SaaS metrics, and the subjective side influenced by how you structure the transaction and position the business. Below are some of our team's thoughts about the extent to which metrics influence valuation, as well as how the subjective element will have a material impact on the final outcome. Link: https://lnkd.in/g_ZF3_4z #saas #valuation #founders #pathtoexit