Yep couldn’t agree more that prep is important. And yeah often someone coming inbound is the most keen (though they still need managing to get the biggest outcome in my experience).
I’m actually working on a “Definitive Guide to M&A to B2B SaaS between $2-20M ARR” (first few chapters on discretioncapital.com/guide), would love your feedback on the draft of the rest given your experience. Email me if you want to take a look: [email protected]
So transaction multiples for us tend to be 5-8x (higher over $10M ARR), with outliers to 15-20x+
But the bigger issue is what you’re alluding to - lots of founders don’t really understand what doors they’re closing when raising a shit ton of cash. If you’ve raised $100M and are worth $50M, not a lot of good outcomes come easily (though I have helped a couple of founders navigate those waters too. Not always successfully)
Fact is - there are many more $50-200M outcomes than $1bn outcomes and if you’ve raised yourself into a corner where you don’t make any money unless you hit $1bn, well then better hope you took some secondary during fundraising.
Great content and perspective. I would say (and fair warning, this is obviously biased as I run one of the investment banks that specialize in B2B SaaS M&A between $2-20M ARR - Discretion Capital), this:
"Now should you hire a banker when there is no actionable inbound interest and you have no prior relationships? I would recommend no, as in such a case bankers would typically rely on their network of Corp Devs and present your company to a laundry list of potential companies that likely have nothing to do with your space or business or you have no interest working for."
..is not how a great banker that actually does deals in the revenue size and market you're in would act. I can see how a "too large" a bank where you're small fry, would do this, but eg in my space ($2-20M ARR), the key job of your banker is to reach out to whomever would pay the most for your business, not just their corp dev buddies they happen to have existing relationships with.
That's not easy - there are 1000+ repeat software buyers with various portfolios and all kinds of timing constraints, and that's even before considering true strategics (in my range, the buyer mix is 70% PE or PE owned, 20% strategics and 10% other).
Typically, for a proper process, you'd want to see 100-150 (well sourced and properly targeted) potential acquirers. If they're just sending you to a handful of corp devs then they're not taking your business seriously and you should get another banker.
You know, if you don’t understand something, it’s totally fine to not immediately comment with whatever your political instincts tell you something might mean.
Or perhaps you have some fresh insight on how the Section 174’s changes (only passed to make the 2017 tax bill revenue neutral) on amortization rules meaning only being able to deduct 20% of salaries in the year paid is in fact totally fair and how maybe all salary deductions should work like this?
AFAIK approximately all “no-stir” peanut butters only have peanuts in them. People don’t buy them because the oil floats to the top and causes a mess and if you don’t stir, then the bottom 1/5th is like glue.