Chapter 7

If we were evaluating your company’s ability to sell for an Outrageous Price, at this point we would have already identified your company’s competitive advantage and identified one possible buyer for your company.  It would now be time to determine if there is a link between what your company has to offer (its competitive advantage) and what the buying company might gain or pain it might alleviate through acquiring it.

To justify paying an Outrageous Price a buyer must benefit in one of two ways:  Either the buyer must: (1) anticipate tremendous gain from its purchase or (2) desire significant relief from the pain that the selling company is causing it.

Does your company’s competitive advantage provide a buyer a means to achieve outrageous gain? Can a buyer leverage your company’s propriety technology, advantageous geographic location, particular expertise, highly successful marketing program, crack sales organization, high quality customer list or access to a specific marketplace?

Or, can you and your investment banker persuade a buyer that acquiring your company is so preferable to competing with it that it will pay an Outrageous Price to eliminate your company as a competitor?
To create the environment necessary to persuade a buyer to pay an Outrageous Price, your investment banker must link what your company offers to what a buyer wants, and that link must be quantifiable.
Your investment banker must create a financial model that clearly demonstrates to a potential buyer—in quantifiable terms—the financial benefit it will experience from purchasing your company.  For example, if your company could successfully roll out a number of subsidiaries in a competitor’s back yard, your investment banker must convincingly predict the dollar effect your actions would have on that competitor’s earnings.

Keep in mind that a potential buyer’s initial response to your investment banker’s theoretical model will likely fall somewhere between shock and cynical amusement.  The former response usually indicates that the buyer has never considered your company to be capable of posing a credible threat (or offering considerable gain).  The latter comes from buyers who are already working to undermine your confidence in your ability to sell for top dollar.

As you will see in the case studies that follow, a buyer’s initial reaction is not as important as how that buyer behaves once we quantify the value of the seller’s company in the buyer’s hands (for example, in terms of cost reductions or additional sales).

I recently represented a medical supply company (EBITDA = $1 million) that provided consumable medical products to ambulance companies.  The seller had identified the best buyer and hired me to conduct a traditional competitive auction that would bring this buyer to the table and push the purchase price as high as possible.   I suggested that this owner consider pursuing an Outrageous Price because:

• The seller’s company had a competitive advantage in its regional control over the ambulance service market.
• There was a large buyer active in the marketplace.
• The seller was willing to walk from the deal if he couldn’t secure the price he wanted.
• I know how to orchestrate an Outrageous Price Process.

As I suggested earlier, once we establish that all four Pillars of the Outrageous Price are in place we have to ask:  Can we leverage this company’s competitive advantage to create buyer gain or relieve pain?

In this case, the theoretical or financial model that I used to demonstrate the effect the purchase of the company could have on the buyer was to show how the buyer could absorb the seller’s sales and eliminate overhead.  Most of the gross profit margin would fall to the buyer’s bottom line.  In addition, with the seller out of the marketplace, the buyer could increase its prices.

As is the case in most transactions (and in all Outrageous Price Processes), we orchestrated a Competitive Auction.  When we opened the auction, we received offers in the $4 million to $5 million range.  Our targeted buyer’s bid was in that range.  Over the next several months, however, we continued to show our targeted buyer how valuable this acquisition could be.  Once this buyer accepted the financial model we created at the beginning of the process, it paid the Outrageous Price:  $8 million for a company worth $4 million.

A WORD ABOUT EARNINGS
Before we jump into the pain/gain discussion, let me add one note.  When we discuss (in Chapter 10) the sale process that we use to sell companies to third parties, the competitive auction, you will observe that if a selling company’s earnings deteriorate during the auction process, the value of the buyer’s offers falls.  The relationship between a fall in earnings and fall in purchase price is not related to the type of sale process we use.  It is, however, related to the type of buyer at the table.  If the buyer is a financial buyer, one who bases its offers on financial formulas, those formulas generally include earnings.

In contrast, the investment banker engaged in the Outrageous Price Process will work with buyers who base their purchase offers on a perception of future value, not current earnings. In the medical supply case study above, the company’s earnings fell to $0 before closing, yet the buyer still paid an Outrageous Price based on its expectations of the company’s future value under its ownership.

CREATING GAIN
One way that a company can create “gain” for a buyer is in the quality or quantity of the customers that the selling company brings to the buyer.

Creating gain often relates to margins.  For example, you may have a contract to sell your company’s widgets to Wal-Mart and Lowe’s.  While your margin is low, and your customer base is limited, you have volume on your side.  Furthermore, you maintain relationships with powerful retailers that may be invaluable to a potential buyer.  Even with low margins, your company could become extremely attractive to a larger company wanting to break into your market. 

Conversely, you may have a roster of high-quality customers who are willing to pay a higher price because your company’s service (or marketing, technology, patents etc.) is so outstanding.  Your sales are smaller, but your margins are impressive.

We emphasized the ability to create gain when we took the circuit manufacturer from Chapter Four to market. We were able to sell that s company to a Fortune 50 company for millions of dollars more than the prevailing industry multiple.

This company made circuit boards and enjoyed net profit margins of about 10 percent.  Its sales staff was able to convince customers that its outstanding customer service was worth the higher price.  This company quickly cut loose those customers who did not appreciate the value in superior service.  Adhering to a disciplined strategy that is rare in any industry, this company worked with only the best and most loyal customers, and did not waste time with those who did not fit its model.  The company chose its customers, not the other way around.

Although this company was not the market leader in terms of size or sales, its high-quality client list was coveted by a larger competitor—and eventual buyer.  Once at the table, this buyer was anxious to close the deal because it had so much to gain.  It raised a minimal number of questions and erected few hurdles so the deal went through with barely a glitch.  (Again, a rarity in any transaction!) 

Company reputation and image can also be a competitive advantage.  Many large corporations have managed to tarnish their reputations, and the acquisition of smaller, more reputable companies can be gateways to improved relationships. A high-tech company with a spotty history of product launches might purchase a smaller competitor with a perfect product-launch record.  This buyer might pay handsomely to enhance its reputation in the marketplace and restore customer confidence.

Finally, a buyer’s gain is often related to its preference to buy rather than build. It’s often easier to buy an existing company rather than to start one from scratch.  Every day deals are made for this reason. As you’ll see in the case of Green Streets later in this Chapter, a multi-national corporation stood to gain a great deal by purchasing a company with a virtual monopoly on road-building services in the northeastern United States.  Once a buyer is able to “see” the potential gain, the sale process becomes very interesting.  

EASING PAIN

In Greek mythology the mother of Achilles, the bravest hero of the Trojan War, dipped Achilles into the magical waters of the River Styx in an attempt to make him immortal.  Unfortunately for Achilles, she forgot to dip the heel by which she held him.  Because Achilles’s heel was untouched by the waters, that small area was mortal and therefore, vulnerable.  The vulnerability we are looking for in an outrageous buyer can be just as small and hard to find as Achilles’ heel.

While the Achilles story is just a myth, the vulnerability of many companies is not.   Companies often have one area of singular weakness, and our mission is to: 1) find it; and 2) exploit it.  More technically, that’s known as: 1) finding the pain and 2) leveraging the competitive advantage.

The key to creating pain is to find some way of irritating the larger company – whether it’s through price margins, public bidding, license agreements, better technology, subcontracts, or any other weakness the other company may have.   Ask yourself, “Am I doing something significantly differently or better than this potential buyer?”  If the answer is yes, you are on the right track to finding your buyer’s vulnerability.

If you don’t immediately recognize a potential buyer’s weak spot, you are not alone.  Owners are often blind to the leverage they can exert against larger competitors or larger companies.  Owners are so focused on expertly running their businesses that it often takes an outside third party who knows what he or she is looking for to recognize the buyer’s vulnerability.

Almost every company has an Achilles’ heel, but it takes creativity and insight to see how your company might leverage its strengths to exploit that vulnerability or to create gain for a buyer.   Once you’ve identified your company’s ability to relieve pain or create gain, it’s time to evaluate whether you, and your advisor can leverage that competitive advantage to create gain or alleviate pain.

LEVERAGING COMPETITIVE ADVANTAGE TO CREATE SIGNIFICANT BUYER GAINLet’s look first at how we go about determining if a competitive advantage has the potential to create significant gain for a buyer.

Recall Green Streets from Chapter Four.  It had a competitive advantage based on a differentiation in knowledge and backward vertical integration. This New Hampshire-based road building company was an approved (and preferred, but not exclusive) contractor to The National Park Service.  Over the years, its engineers had designed road-building techniques that adhered to the Park Service’s strict requirements in road building.  For example, Green Streets successfully built roads without moving any dirt more than 100 feet from its original location.  Sensitive to the Park Service’s environmental concerns, it inspected (and if necessary repaired) its trucks on a daily basis to prevent any leakage of oil or other fluids.

In addition, to its knowledge of and compliance with multiple and often confusing Park Service regulations, Green Streets had, through its own acquisitions, vertically integrated its supply chain.  At the time I met with Stewart, its owner, Green Streets owned a quarry in the Granite State allowing it to control its primary input source better than most, if not all, of its regional competitors.

Green Streets was run by its second generation of owners and had grown under that leadership from $3 million to over $100 million in annual revenue. Stewart had groomed the management team so well that he was spending no more than 15 hours per week on company business.

A multi-national construction conglomerate had approached Stewart and offered him $38 million for the company.  Stewart suspected that his company was worth more and initially asked me to perform a market valuation.      

After a review of all the factors we predicted that we could sell Green Streets for 3.5 times its EBITDA so we estimated that Green Streets would be worth $50 million in the marketplace. Stewart agreed that $50 million better reflected his idea of the company’s value and decided to pursue that price through a competitive auction.      

Readers who recall the Four Pillars of an Outrageous Price may be wondering, “Why not go for the Outrageous Price?  You’ve got a company with several competitive advantages a huge buyer active in the marketplace and already interested in the seller’s company, a seller who does not need to sell, at least not immediately, and an investment banker who knows how to orchestrate an Outrageous Price Process!”

That’s all true, but at the time I met Stewart, I hadn’t yet formulated the Outrageous Price Process.  While I had observed that similar companies sold for wildly divergent prices, I hadn’t figured out why.  I assumed that sometimes owners got lucky or sometimes buyers paid too much or sometimes the market just overheated.  In this case, we didn’t intentionally go for the Outrageous Price.  Instead we deliberately set up a Competitive Auction to make sure Stewart would get top dollar—from whatever buyer stepped up to the plate.

Once I put Stewart’s company on the market the multi-national company increased its bid to $43 million.   Other bids came in around $50 million and a few Private Equity Groups pushed the bidding into the $60 million to $70 million range.  Stewart’s value expectations were confirmed in the place where it counts:  the marketplace.  Real buyers thought Stewart’s company was worth far more than $38 million.

As the auction progressed, the strategic buyers at the table (those not basing their bids on financial formulas) moved ahead of the financial buyers.  I spoke with each bidder—including the multi-national bidder—answering questions and showing each how Green Streets could offer it huge potential gain.
           
First, in acquiring Green Streets, a buyer could gain access to current and future National Park Service contracts.  Green Streets not only knew how to bid successfully for contracts, it enjoyed a stellar reputation for completing them as promised.
           
In the case of the multi-national bidder, we learned that it had already purchased large road builders in the Southeastern United States, but that it hadn’t been able to find a toehold in the Northeast.  To successfully expand into the mid-Atlantic states, this multi-national did not want to compete with Green Streets—a formidable adversary.
           
During this period of time government funding for highway construction was increasing dramatically and Green Streets was uniquely poised to exploit this opportunity.
           
And finally, there was the quarry.  Unlike most of its competitors, Green Streets controlled the price of one of its most significant input costs.
           
We communicated frequently with this multi-national buyer about all the ways it would benefit from acquiring Green Streets.  When it understood our case, it offered $85 million and Stewart agreed that we’d found our “best offer.”  (An offer I would later call, “the Outrageous Price.”)

LEVERAGING COMPETITVE ADVANTAGE TO RELIEVE BUYER PAIN
In addition to leveraging a competitive advantage to create significant gain, there are many ways to alleviate pain for a potential buyer.   In Chapter Four, we introduced Terry, the owner of St. Louis Post.  Terry had created a machine that produced signposts much more cheaply than the process its giant competitor, “Goliath,” used.  In this Chapter, we’ll see how we demonstrated to Goliath that it was less painful to pay Terry an Outrageous Price than to have its prices undercut in a public bid situation.

As you’ll see, it only took a Mother’s Day, a Father’s Day and an Owner’s Birthday sale to give Goliath a headache big enough to scramble for its checkbook.  Once we found Goliath’s vulnerability, we exploited it and sent shockwaves through its normally stable marketplace.  Goliath paid an Outrageous Price to eliminate St. Louis Post from its marketplace and to secure its owner’s commitment not to compete.

Pain: Case Study #1

Terry’s company, St. Louis Post, had a significant competitive advantage based on cost leadership gained through a difference in automation.  As you may recall, the mill that St. Louis Post had used for refabricating railroad rails into bar stock necessary to create heavy-duty steel signposts closed (due to eminent domain).  Terry responded to this loss by developing one machine, at a cost of about $1million, to make signposts for $600/ton.

You may also recall that Terry’s largest competitor, a division of a major multi-national corporation that we’ll call “Goliath,” controlled 90 percent of the market, and was selling posts at $1700/ton.
           
When Terry and I first met, St. Louis Post had about $2 million in annual sales, and Terry told me that he had already approached Goliath to gauge its interest in buying him out.  Not surprisingly, Goliath was not interested. The market share that Goliath would gain through purchasing St. Louis Post was not significant enough to make an offer, much less an offer of an Outrageous Price. During our meeting I also learned that Terry would happily leave his company if he could get $5 million for it.
           
One pillar of the Outrageous Price Strategy was in place:  St. Louis Post clearly had a competitive advantage, but could we leverage it?  At first glance, Pillar Two seemed to be in place as well:  a large buyer in the marketplace.  But could we persuade it to pay twice the industry’s average multiple?  Pillar Three is an owner/seller who can trust the process, trust his or her investment banker and stay on script.  Could Terry maintain an “I don’t need to sell attitude?”  Pillar Four is the investment banker who knows how to pull all the pieces together and to go for the Outrageous Price.  Terry had come to the right place.
           
We’ll talk in detail about the other three Pillars in subsequent chapters, but let me digress just long enough to point out once again that even with all the Pillars seemingly in place, there is no guarantee that the four ingredients will lead inevitably to an Outrageous Price.  We know that the Outrageous Price is not possible if one Pillar is absent, but even with all four present, the Process is still subject to all of the unpredictabilities of human and corporate behavior.
           
Knowing that: 1) Terry had a significant cost advantage over Goliath and all his competitors, 2) there was a large buyer in the marketplace and 3) Terry was willing to trust the Process, we decided to go for the Outrageous Price.
           
Our theory was that the best way to leverage Terry’s competitive advantage was to cause our targeted buyer pain.  Terry and I used the public bidding process that states use to purchase highway signs to catch Goliath’s attention.  As an experiment, we chose a small state and submitted our bid to provide sign posts at $900/ton.
           
Within days Terry got reaction we were hoping (and had planned) for—the call from our targeted buyer asking, “What are you doing to our market?  What you are doing will screw both of us!”  Terry answered truthfully, “This bid won’t screw me.  I can sell as low as $600/ton and still make a profit.”
           
Graciously, Terry invited Goliath to visit his plant.  Goliath could not resist the chance to see what Terry was doing to undercut its price. 
           
Terry and I carefully staged the visit.  I drove Goliath’s representatives by a bank Terry partially owned and on whose board Terry sat. I causally mentioned Terry’s other holdings and when we arrived, Terry’s plant was clean and well-organized.  We scripted everything to show Goliath that Terry had deep pockets, that he wouldn’t be driven out, and that he certainly had the capacity to hurt Goliath’s post-making division.
           
Once in the plant the visitors were visibly impressed that Terry’s machine required only one guy to run it compared to its reliance on union-heavy shops.  That signaled to them Terry’s ability to undercut Goliath indefinitely.
           
As we neared the end of the visit, one of Goliath’s representatives asked if Terry’s company was for sale. I answered that Terry would consider a sale only if the price was based on his company’s future value and the profit it would generate for its buyer.  Terry would not entertain any discussions of a price based on current sales or EBITDA.  Predictably, the Goliath ignored us and left town.
           
Soon after, St. Louis Post held a Mother’s Day Sale” offering posts at a significant discount. Goliath’s people called us express interest in buying Terry’s company.  In June of that same year, Terry held a “Father’s Day Sale.”  At this point, Goliath’s customers started calling to ask why Goliath had charged them so much over the years when St. Louis Post wasn’t charging nearly as much.  These calls increased Goliath’s willingness to negotiate.
           
Only when we were ready did I communicate to Goliath Terry’s asking price of $20 million.  Not surprisingly, Goliath hung up the phone and I suggested that Terry celebrate his birthday with a “Birthday Sale” with posts priced at an even greater discount.
           
Meanwhile I had been looking into the probability that several potential Chinese buyers could pose a threat to Goliath if they had Terry’s technology.  As my investigation proceeded, I learned that while the Chinese buyers might pose a threat to Goliath, they were so wedded to their financial formulas that they’d never pay the Outrageous Price we were seeking.  Their presence in the marketplace, however, contributed to the leverage we were able to exert against Goliath.
           
Within days of Terry’s Birthday Sale, Goliath called me with an offer of $7 million.  Price negotiations stretched out over several months until Goliath offered Terry $14 million for his $2 million company.
           
As part of the negotiations, I asked Goliath about an employment agreement for Terry.  I admit I did not anticipate its response.  Instead of an employment agreement, Goliath was interested only in a non-compete agreement for Terry.  We had assumed that Goliath wanted Terry’s expertise and his machine.  Instead, Goliath wanted the patent on the machine and Terry banished from the marketplace. 
           
Terry signed Goliath’s non-compete, the deal closed and Goliath promptly destroyed Terry’s machine, dismantled the plant and sold the real estate.  More significantly, within a year it raised the price of steel signposts from $1700/ton to $2400/ton.
           
Through the purchase Goliath now controlled the marketplace.  Goliath had not been motivated by gain:  taking its market share from 90 to 100 percent would not have caused it to pay an Outrageous Price.  Eliminating a competitor who had demonstrated its ability and willingness to disrupt the market brought Goliath to the table and made it willing to pay an Outrageous Price.

Pain Case Study #2

In Chapter Four, we also met Ignatius Eberhardt and his company, Wisconsin Medical Waste (WMW). WMW had a lock on the Milwaukee’s medical waste market. Iggy had spent years cultivating relationships with customers and upgrading the company’s services.  WMW’s trucks were cleaned daily, its representatives made their rounds in clean white uniforms, and employees were trained in customer service by a manager who had worked for a 5-star hotel chain.  Most critical to its customers, WMW organized such frequent pick-ups that a medical sharps container never reached capacity, much less overflowed.
           
I didn’t know all this when Iggy decided to sell.  In fact, I hadn’t even met him. Like many owners, Iggy decided that he could negotiate a directly with the most logical buyer, National Medical, a huge firm that controlled 85 percent of the national market. Iggy had successfully kept National Medical out of the Milwaukee market for years.  His gift for creating extraordinary customer service helped WMW gain access to the city’s network of powerhouse hospitals and private medical practices. 
           
Iggy and National Medical eventually struck a deal for $6 million or four times EBITDA—a standard multiple in the medical waste industry.   After months of contentious negotiations, National Medical failed to show up on closing day.  The deal fell through, and Iggy’s plans to climb the highest mountain on each of the seven continents crumbled. 
           
Iggy resumed running his highly successful business, but had newfound energy to keep National Medical locked out of the Milwaukee market. When National attempted to build a new disposal facility in Milwaukee a year or two following the failed negotiations, Iggy used his considerable political connections to close the facility for environmental reasons. 
           
Eighteen months later, Iggy blew the dust off his mountain-climbing dream and decided to try once again to sell WMW.   This time, he sought my help.
           
At that point in my career, I had not formalized the Sale Readiness Assessment (see Appendix A).  I would ask most of the questions in the Assessment, probing the responses that would lead me, not only to determining if the owner was ready to sell, but also to what it was that made the company unique.  In Iggy’s case, we spent three days in a conference room, decorating the walls with huge lists of ways in which WMW was different than its major competitor.
           
I started researching potential buyers.   We looked at PEGs, competitors and those involved in adjacent industries.  Iggy wasn’t interested in selling to a PEG because he wanted more than the standard multiple for his company.  The adjacencies we identified might be interested and we would eventually use them to create an auction.  But of all the possible buyers, National had the most to gain from a purchase of WMW—if we could not only attract its attention, but persuade it to make an offer that exceeded $6 million.
           
Was the possibility of gain enough to persuade National to return to the negotiating table with a much better offer?  Maybe or maybe not.   To answer that question, we began to search for National’s vulnerability.  In this case, what could we do to make not buying WMW painful for National?  What could be more painful for National than acquiring WMW?    We believed that it would be significantly more painful for National if WMW expanded and became a dangerous competitor in other markets, especially in Chicago, where National was headquartered.
           
We created an expansion plan.  At the same time, we drew up detailed 5-year projections about what WMW would be worth if our expansion plan succeeded.  In five years, we reasoned, WMW would be worth $20 million.
           
We notified WMW’s attorneys and CPAs of our plans.  WMW then began applying for permits to do business in the Chicago area.  Because the permitting process is public record, National quickly got wind of our applications and called Iggy, demanding to know what WMW was doing.
           
As we had scripted in advance, Iggy told National that because he was focused on expansion plans, it would have to talk to me, his investment banker.  He told National that the experience during their first go-round had taught him that he needed someone else to manage acquisitions while he stayed focused on running the company.  Iggy told National that he wasn’t interested in selling, but if they wanted to pursue anything related to acquisitions to talk to me.
           
When I received the first call from National, its representative causally asked if WMW was, indeed, for sale.  I told National that Iggy had decided to expand and that we were considering acquiring National’s east coast operation.  National’s representatives were flabbergasted and assured me that WMW could not buy National’s east coast operations because National was going to buy WMW. 
           
That first phone call was the first sign from National that our strategy of causing pain in order to elicit a better offer was going to work.  Had National not reacted so quickly and with obvious concern, we might have been forced to shift our strategy.  But a shift was not necessary.
           
We commenced a three-month exchange of phone calls during which I had ample opportunity to politely remind National that it had very little credibility in Iggy’s eyes, after backing out of the deal years before.   Finally, after courteously, but repeatedly informing National that Iggy was too busy planning WMW’s expansion to evaluate a sale, I told National that if Iggy were even to consider a sale, it would have to make an offer of $20 million, no less.  Predictably, National rejected the Outrageous Price, and we rejected all of its lower offers. In the meantime, Iggy continued applying for permits in northern Illinois, southern Wisconsin and western Indiana, and National grew increasingly nervous. 
           
To achieve my goal of maximizing the chance that a deal will close, I always formulate a back-up plan.  The back-up plan for WMW would increase the pressure on National.  During our evaluation of potential buyers, we had identified a multinational company with enough cash to buy WMW that dabbled in the medical waste business. According to our back-up plan we approached the multinational company and secured an offer for $6 million.
           
Word of the offer (but not the amount) quickly circulated back to National and the news put pressure on National.  Over the next few months, National gradually raised its offer.  We rejected each until National made what we considered to be a serious offer:  $18 million.   Iggy graciously agreed to sell.
           
One year passed between the day that Iggy retained my firm and his closing date.  Three years had passed since National took its $6 million and left Iggy standing at the altar.  During those three years WMW’s profits and sales had not improved, but National tripled its offer to $18 million.
           
National was willing to pay an Outrageous Price to avoid the prospect of competing against WMW in markets it was accustomed to controlling.  We based our Outrageous Price Process on that assumption, tested it by pulling permits and it paid off.
           
Clearly, one of the keys to succeed at securing an Outrageous Price is to create a situation in which it is far easier and preferable for the buyer to purchase your company than to deal with the consequences.  That defines finding a company’s pain.

THE OUTRAGEOUS BUYER IN THE COMPETITIVE AUCTION

The sale process that we used in all three of these cases—and in all others in which we achieved the Outrageous Price—is a competitive auction.  While we will describe that process, in detail, in Chapter Ten, there’s a twist to the auction when there’s an Outrageous Buyer in the mix.

In a competitive auction, we invite all prospective buyers—including the buyer we expect to be our Outrageous Buyer—to submit offers.  Remember, identifying an Outrageous Buyer is a prediction based on the best data we can collect.  It is not a sure bet.
We invite other buyers to the table in an effort to ensure that: 1) we have included any buyer who could (unpredictably) become an Outrageous Buyer, and 2) if our predicted Outrageous Buyer is not, for reasons we could not anticipate, excited about the selling company, that the seller still reaps the best price the market will offer.

As we conduct the competitive auction, the Outrageous Buyer—either the one that we expected or one we did not—identifies itself through its better-than-its-competitors’ offer. While we continue to engage the other prospective buyers and encourage them to increase their offers, we enter into a negotiated sale (one between one buyer and one seller) with the Outrageous Buyer.

We conduct the competitive auction with the non-Outrageous Buyers at the pace that our progress with the Outrageous Buyer dictates.  While we carefully plan and conduct all interactions with all buyers, I spend more time with an Outrageous Buyer than I do with others to make sure that the Outrageous Buyer understands how its failure to purchase my client’s company will cause it pain or why acquiring it holds vast upside potential.  That time is rarely wasted.

If your company has a competitive advantage that we can leverage to create gain or alleviate pain for just one buyer in the marketplace, another piece of the Outrageous Price Process puzzle slides into place.

The next challenge is to figure out how you and your investment banker can demonstrate to that one buyer how much it will benefit from acquiring your company.  Can the two of you create a strategy that demonstrates to a buyer—without letting that buyer know that you are actively selling your company—how acquiring your company will yield it outrageous gain?  Or can you persuade a buyer (as did Terry and Iggy) that acquiring your company is so preferable to competing with it that it will pay an Outrageous Price to do so?

These are the questions we will begin to answer in the next chapter.