Today I am pleased to be giving a presentation at the World Financial Symposiums annual conference in London.  If you have missed the WFS this year then make a note for next, it is a great event (  Anyway, as part of my talk I have been reflecting on the key drivers to higher valuations for software companies.  

There is much a software company can do in preparation for the sale process, reducing risk and demonstrating strategic value to the buyer.  As with most sales, the goal is to convince the buyer that your company is just what he needs; then the price becomes a secondary issue, but only if one further key thing is achieved.  Even a well-motivated buyer that has no competition will low-ball his offer, and a seller with no alternative buyers will find it difficult to call his bluff.  Competition is the easy way of ensuring that buyers fully reflect in the offers that they make, the value that they place on the strategic benefit to them - a global competitive auction between willing and able buyers.  

There may well be an ideal local buyer and often sellers will be tempted to only approach these likely buyers.  However, without competition from other potential buyers a seller cannot be sure that the best offer has been made.  Software is a global business.  A sellers dominance in one geographic territory can be of great strategic value to a well-financed buyer currently operating successfully in other territories.  Similarly, buyers in other related sectors, for example sectors that share the sellers customer base, can be a ready source of potentially interested buyers.  

Of course research into potential buyers in other sectors and other territories is at the core of the skills brought by M&A specialists such as Corum.  But, whether a seller uses an advisor or not, without a global competitive auction between willing and able buyers, a seller runs the risk of leaving money on the table.