$1-3MM revenue company looking to sell?
Hello Everyone,
My parents are looking to sell their ~$3-4MM revenue (.5-1MM EBITDA) software company, and I wanted to get some references for sell-side banks that work with companies of this size.
I’ve also considered just creating my own CIM and cold calling VC’s or other potential buyers and to try just doing this on my own for both the experience and keep the money in the family. Sure it won’t be a huge payout but could be something to speak too. I’m an A2 in LevFin at the moment so not the most experienced here but feel this could be an opportunity to talk about in interviews for PE or other jobs in the future as well.
Is it crazy to think I could try to do this on my own? I don’t really have my own network here, but believe I have the skills and the passion to put in a ton of time on this.
Any advice greatly appreciated!
Way too small for a bank, you'd be stuck with a broker.
I would sell something like this myself using a marketplace like MicroAcquire.
I wasn’t aware of microacquire, thanks for the tip!
Pros and cons to each, am a bit torn here.
Small size, I'm not sure how large the universe of potential advisors would be. Maybe it falls into business broker territory? I don't know tbh, micro cap US landscape is alien to me. What I will say is the fees on a deal of this size means most "credible" advisors will shovel you off to an associate. You won't be a priority. The flip side is you still get access to their rolodex.
Obviously you'll put a lot more work and effort in if you were to do it on your own. Downside is you don't know the landscape. There is likely a very very small universe of buyers that would look at $1M in EBITDA at that margin (low for software). There is probably a universe that may be interested in the product, but can't comment without knowing specifics.
Why not continue to grow? They'll have a lot more options and value at $5-10M in EBITDA.
Are you willing to share some more details? Whats the recurring piece look like, what kind of software, is it home grown, are you a reseller who customizes, etc.
send CIM and I'll let u know if interested
hit up Constellation Software
These guys will look at anything and everything.....and will also low ball
For OP- $3-30M revenue is the sweet spot for these guys so you can definitely check them out. Agree with the comment saying that they lowball since they use all cash, buy and hold forever etc.
Works out for them apparently, they just got Allscript's hospital EHR business for 4.8x EBITDA in a 12x+ environment
Will crush you with diligence and calls and come back with the lowest offer.
At that size you’re looking for more of a business broker rather than investment bank. There are a few decent brokers (generational, benchmark, etc.) but most are pretty awful.
The business falls into more search fund territory rather than a real VC/PE buyer. I actually recently left my PE job and raised a search fund so happy to get the word out to other search funds if you’re interested.
PM me if you have more details. I work at an boutique and have heard of deals being done in the 10M EV range at some places if it’s a simple deal, not very hairy. Depends on the segment (software is pretty broad).
Bring in a lawyer who's familiar with the space.
Have you thought about trying to do a commercial partnership with a larger company in the space? If it goes well and the company sees a lot of value in the software, they could acquire.
This obviously would take a lot of time and could potentially fizzle out but could get a pretty good valuation if it does workout.
Could they hold on for a couple years and get to 5m revenue with 15-35% EBITDA? if so, capital clarity in SF is a remote first bank that can handle it
Would go to a regional no name boutique with a few analysts. It’s not highly publicized on here but some of the LMM banks are SCUM and will torture their poor analyst for 100k fees
At a firm that looks to buy/invest in businesses with this profile. Send over a message.
maybe big4?
Being involved yourself would likely be a compliance violation if you don't bring it up with and get permission from the bank you're working for.
OP here - really appreciate all the responses, at this time theirs no final decision being made for next steps yet. As a number of people mentioned the best move is to probably wait a few years and try to grow the business before selling, and that may happen. If they do decide to start the selling process in near future I will reach out to the people who seemed like resources and responded above.
Could be ideal for a search fund (if not on the smaller side honestly)
PM me, I can intro you to a few bankers that solely do sell side M&A of this size software businesses
pm me i work for a place that does software deals of this size, am actually working on one right now
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