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http://www.amazon.com/Make-Money-Bob-Bottom-Entrepreneurship...
This is getting more into the valuation side, but if the multiple you speak of is based on 8x EBITDA because of some sort of recurring revenue/profit, then you could find investors elsewhere (easy). If it's based on an IP valuation and you are a company in debt and not making money, that's a different story. Just the fact that someone is interested in acquiring you (whether it's just a fishing expedition or legitimate) will bring confidence to other investors. Regardless, it's a personal decision. I always think of it like this - if you were to not take the deal, and your company went bankrupt in 2 years, or you did take the deal and your company grew 10x in 2 years - which would you rather do? If you are not ready to sell your company, then don't do it. In my last company, we got 3 potential buyers before we sold - everyone wants to buy a successful company (especially now that so much capital has been pulled out of the markets).
Regardless - congratulations. Whether this is fishing or real, it's a great milestone to reach - so be excited about it.
As a buyer I always want to see stats before making an offer. As a seller I will give basic revenue figures and then ask for an LOI with a # or at the very least a number in writing to see if these people are serious.
I think when you hit a certain price range you're better off taking an M&A firm that works in your market. 7 figures is definitely in that price range. The really good firms take your company, wrap it up, and basically take it to auction.
If you're really serious you need an advisor + counsel to make sure you don't screw yourself over. Taking advice from people on the internet is never a good idea.
Couple of tips:
- NDA is useless. Sign it but don't expect them to adhere to it. Even if they don't, it's extremely difficult to prove a breach (they likely won't be disclosing it to others anyway, just using it against you).
- Ask them how they plan to price your assets - is it based on your financials, your technology, your customers, etc. This may disqualify them right away: e.g. they tell you is that they only look for revenue growth while you think your technology is the most important part of the company.
- Have them give you a formal presentation on their company and where they see your firm fitting in. This really serves 3 purposes: a) allows you to see how they are approaching the market and whether they've thought this through or if it's a fly-by. If this is a random "let's see if we can buy this cheap" situation, they'll likely be reluctant to spend quality time with you; b) you will learn what their pain points are, which will give you leverage later, if the acquisition progresses; c) probably most important, you will spend time together and will start to get a sense on whether you can trust them. Establishing a beginning of a professional relationship goes a long way for you (e.g. sometimes you just know if the other person is a charlatan or if they are a straight shooter) and for them (they start developing a level of trust and are not as suspicious you'll trick THEM)
- after the initial meeting, share your concerns and ask them for suggestions on what they would do if they were in your shoes
There's more, feel free to reach out to me directly if you'd like.
I-banker here. I deal with similar situations on fairly regular basis. Couple of tips: - NDA is useless. Sign it but don't expect them to adhere to it. Even if they don't, it's extremely difficult to prove a breach (they likely won't be disclosing it to others anyway, just using it against you). - Ask them how they plan to price your assets - is it based on your financials, your technology, your customers, etc. This…
This is a case where the acquiring company has the burden of convincing a potential seller to sell. It is not a positive sign if the buyer is unwilling to pitch their deal all out.