Selling the Intangible Company: How to Negotiate and Capture the Value of a Growth Firm (Wiley Finance)
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In Selling the Intangible Company, Thomas Metz helps entrepreneurs and venture capitalists to better understand the process of selling a company whose value is strategic. He addresses all the key issues surrounding the sale of a company in which the value is in its technology, its software, and its know-how–but has not yet shown up on its balance sheet. Filled with in-depth insights and expert advice, this book provides essential information for business professionals and technology CEOs who need to understand the nuances of selling a company with intangible value.
WAR STORY: PAID IN STOCK—BUMMER ... JACKPOT In this situation the founder was insisting very strongly that if he were to be paid in stock then I should be paid in stock as well. He was worried about having enough cash at closing. This was early in my career as an investment banker and I did not fully understand the implications of accepting stock. I did not really want to accept stock at all, but the client was very insistent about it, so I said yes in order to appease him. Thus, the bummer from
mergers, See international transactions cross-selling opportunities culture customer base customers acquiring communicating with issues needs D data room DCF, See discounted cash flow deal champion deal skills debt deferred compensation degree of certainty descriptive memorandum, See memorandum dilution Disclosure Schedule, See Schedule of Exceptions discount rate discounted cash flow (DCF) example discounted future earnings, See discounted cash flow distribution
investor seeks for his capital. If investors seek a return of 25 percent for an investment in company Alpha because of its risk characteristics, then Alpha’s cost of capital is 25 percent. A technology company, especially a smaller technology company, has greater business risk than IBM so it must return more than 11 percent to its investors. The required return to investors for a firm with less than $20 million in revenue will usually be from 20 to 25 percent, and higher if the company has a
are introduction, growth, maturity, and decline. A similar graph can illustrate the best time to sell. However, instead of the vertical axis representing total revenues, it represents the relative selling price of acquisitions. It is critical for a selling company to view the market stages from this viewpoint—from the perspective of how much a buyer is likely to pay. The stages break out like this:1. Early development 2. Growing nicely 3. The light bulb goes on 4. The slide 5. Consolidation
own technology standards. Although the firm should be applauded for its creativity, when it comes time to sell the company its unique technology may be a disadvantage if it does not comply with the technology standards of the buyer or of the market. Licensing issues. The seller may be licensing software programs that make up portions of its applications. The company must make sure that these licenses are transferable to the buyer. Sometimes the cost of these licenses can be expensive and the