Almost always, when speaking with a potential client, I get asked, "Can you tell me what my company is worth." I begin by telling them that valuation disclosures of completed transactions among smaller and emerging software companies are almost never made public. The reason is they typically don't have to. If the buyer is a private equity firm, they will not disclose what they paid for an acquisition. And if the buyer is a public company, the valuation disclosure is typically not required because it falls below the threshold of being material. So, as a result, there are not a lot of data points to be gathered. And even if you can point to some transactions where values have been reported, they frequently are very likely not representative of what your company COULD be worth.  

The real truth is that no matter how many valuation scenarios you run or how many spreadsheet models you create, you likely will be completely wrong. Technology companies are typically acquired based on the strategic gaps they fill in the acquirer's product set. These strategic gaps can be filled much more quickly through an acquisition than in building it themselves. And it's usually less risky – the technology is already proven, there is a development team, and customers.  

So how do you ensure you get the best valuation and terms in the market? You run a thorough global process. You reach out to a broad list of buyers, some in your space and many in adjacent spaces. You reach out to companies in different geographies who may have a strong need to gain a foothold in your geographic market. You create an auction-like environment where you get multiple interested parties to the table at the same time through this detailed process. These parties begin to feel that acquiring your company is key to their strategy.  

Corum Client Case Study 

A client asked us to provide a valuation while they were considering engaging us. We did the standard review, found some comparable transactions, did a discounted cash flow, looked at some public company comparable transactions and came up with a $17M figure. We explained that this was likely not very accurate as it didn't take into account the strategic value (intangibles) that they would likely provide a buyer.  

We embarked on a global search for a buyer. Early in the process, the first offer we received was $16M – the potential acquirer had run similar numbers as Corum. Toward the end of the process, we had several interested parties at the table – three that really wanted our client's technology and subject matter expertise. We got one party to eventually put $40M on the table and then used this leverage with the 3rd party, who raised their offer to $45M and prevailed.  

Our client eventually sold for almost three times our original figure. How was that possible?  It's because a spreadsheet can't tell you what your company is worth. The value can only be determined by running a thorough global PROCESS.