Re:Ask YC: Aquisition Advice
by tptacek on Thursday June 26, 2008 @12:26AM
(#228258)
There's no magic formula that produces valuations. But one way to think of them is as a negotiation about what the multiple is.
Consultancies commonly sell for 1.5x-2x, because staff turnover means the acquiring company is really only getting a pipeline, some relationships, and maybe a few staff.
Enterprise product companies commonly sell for around 5x. Security valuations oscillate between 5x and 15x (on the wildly successful side). Sometimes new, small startups sell for ridiculous high multiples because otherwise the total number would be too low.
I'm not saying, "take your revenue and multiply by two". I'm saying, "think about the value you provide your acquirer in the abstract", and then put a multiple to it.
Consultancies commonly sell for 1.5x-2x, because staff turnover means the acquiring company is really only getting a pipeline, some relationships, and maybe a few staff.
Enterprise product companies commonly sell for around 5x. Security valuations oscillate between 5x and 15x (on the wildly successful side). Sometimes new, small startups sell for ridiculous high multiples because otherwise the total number would be too low.
I'm not saying, "take your revenue and multiply by two". I'm saying, "think about the value you provide your acquirer in the abstract", and then put a multiple to it.