|Financial buyers use financial formulas to
determine the price they will pay for a company. In its most rudimentary form, these buyers establish the minimal rate of return that they require and work backward to a purchase price. An Outrageous Price is one that is at least two times the prevailing average industry multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization). I assume that you are aware (or as aware as you can be) of the multiples for your industry. Imagine, for a moment, being paid twice what those multiples would suggest.
To help determine if your company is a candidate to fetch an Outrageous Price from a strategic buyer (one who does not use a simple formula but instead pays based on its perception of future value), we will look at the analysis and process that enabled some not very remarkable companies to do so.
|We can pursue the Outrageous Price Process- designed to yield at least twice the EBITDA multiple of an average company in the industry- if the following Four Pillars are in place: