News and Research

Investment Bankers, Valuations, and More – Developing Your Sale the Right Way

Selling a technology  company, whether it might be an IT services or digital media company sell, naturally comes with a lot of questions and uncertainty. For many tech company founders, this might be the first time they are thinking about selling any kind of company – an event typically requiring months of planning, preparation and negotiations even for tech industry M&A professionals. As this is likely a tech company founder’s first sale however, a number of uncertainties and questions make it especially difficult to know whether your investment banker is prioritizing you, whether you should sell or not, and whether you’re getting the right price and terms for your needs.

Read below to find out what factors you should be paying attention to when selecting an investment bank advisory to work with when selling your tech company.


Tech Industry Investment Banking Advisory

One of the most important needs your tech company will have is an M&A advisory with direct and specific industry experience. M&A valuations vary across even industry sub-sectors like enterprise software, IT services, cloud, eCommerce and digital media, making a sell-side advisory with experience in handling your specific type of company incredibly beneficial. Tech industry expertise also means your tech investment banker will better understand what your company does and what attributes make it differentiated, allowing them to better present your case as a potential tech acquisition to prospective buyers. You want someone who understands your story, priorities, and needs and will work with you toward achieving both you and your tech company’s current and future plans. In short, you want an industry focused investment banker to get the job done correctly.

Look to see what level of seniority the tech investment bankers presenting to you are. Does their advisory firm and investing banking team take you seriously, and bring in a senior level investment banker? Has the team representing your tech or digital media company in your potential sell transaction have a history of successfully navigating multiple transactions in your tech industry sub-sector? Who will be your point of contact, and how much experience do they bring in tech industry acquisitions? Does your point of contact have the experience cited in leading successful tech company acquisitions, or are they speaking on behalf of the firm? How often do they communicate, and is it appropriate for your situation and needs?


Valuations and Metrics

Just as there are multiple ways of arriving at an initial valuation for a tech or media merger, there are multiple factors that can influence the final valuation of any tech company. Some acquiring companies rely on DCF (discounted cash flow) to arrive at an initial valuation, while others might look at Revenues and/or EBITDA (earnings before interest, taxes, depreciation and amortization). Ultimately these initial valuations will be negotiated many times over based on a variety of factors potentially leading to one company’s sale price being starkly different than another’s, despite striking similarities on the surface.

In young companies particularly, valuations can be particularly difficult to estimate. Tech companies might find their valuations fluctuate based on factors such as number of monthly users or some other less financially-oriented statistic. Younger company valuations are often more volatile and future-oriented.

One thing to note is how much your initial valuation can change – while it is tempting to simply multiply an EBITDA by 10 to arrive at a high valuation, this will not always be the case for all tech companies. Competition among buyers, a particular niche or role your company might fill, key executives or employees, future markets, and even synergies can drastically influence valuations. Furthermore, in negotiations, concessions will likely have to be made on both sides. Seller financing, problems arising after the deal is completed, changes in valuations, taxes, approvals from the government, deal protection measures, which party might pay the legal fees and even timetables need to be negotiated, drastically affecting sell price. It is probably best to approach a deal from a qualitative perspective rather than a quantitative one, though of course keeping in mind a walk-away number is also very wise.



Timing can be a huge factor in any tech company sell. As so many factors remain outside of any single tech company founder’s control, it can be difficult if not impossible for a tech company founder to know when to sell. If anything though, Yahoo showed just last week that selling early is often a much better idea than selling late, even if it feels like your valuation has room to grow.


About Solganick & Co.

Solganick & Co. provides specialized M&A advisory service to companies in the technology and digital media industries. We use our expertise in these industries to provide a customized program designed to maximize shareholder value. Our team can help you understand current market trends and valuations while leveraging our industry experience to offer guidance in business transitions.

If you are interested in or are considering exploring your tech M&A options, get in touch with our advisory team at Solganick & Co.