Software Business Broker handling M&A projects for lower middle market business owners. I work with software and SaaS companies having revenue between $3m-$20m. My clients typically receive multiple offers for their business.

1. David Jacobs
Business Broker

2. Agenda
• Overview
• Market Segmentation Overview
• Buyer Types
• Ideal Seller Profile
• Advantages of a Broker
• Deal Terms and Valuation
• Thoughts on Asking Prices
• Godfather Offers
• Business Terms
• Seller Commitment
• Next Steps

3. Overview
• David is a licensed California Business Broker. He is with Link Business –
Silicon Valley.
• His focus is on the Lower Middle Market.
• Revenue between $3m-$20m
• EBITDA between $1m-$5m
• 15-50 W2 employees
• His industry focus is
• Software / SaaS
• Software Enabled Businesses
• Service Based Companies capable of supporting a regional or national customer base

4. Revenue
(in Millions)
Key Attributes Served by Segment Entities in USA
$0 - $3 Owner operated, simple cap table, typically local
retail locations
Business
Broker
Main
Street
13m+
$3 - $20 Owner operated, some professional
management, cap table has outside investors but
usually angels or friends and family
Business
Broker
Lower
Middle
Market
8m
$20 - $200 Professional management, larger cap table with
some professional investors
M&A
Advisor
Middle
Market
180k
$100 - $1bn+ Professional management, potentially thousands
of investors, can be publicly traded, complex legal
and tax decisions, international operations
Investment
Bank
Public
Market
30k
Market Segment Overview

5. David’s Buyer Types
Type Funding Holding
Period
Operating
Involvemen
t
Successful when
Owner/Operator Personal equity, SBA Loan career Daily Earn a good living
Searchfund Institutional Capital, SBA
Loan, some personal
equity
5-7 years Daily Grow and sell 5-7 years later
Private Equity Institutional Capital 5-7 years Part of a
portfolio
Grow and sell 5-7 years later
Family Office Capital from one or more
wealthy families
indefinite Part of a
portfolio
Grow and pay regular dividends
Corporate Strategic Public company indefinite Daily Rapidly scale a synergistic business

6. Ideal Seller Profile
• Owner of a scalable business with a valid reason to sell.
• Businesses are usually sold for lifestyle reasons, not financial reasons
• Valid reasons include: retirement, burnout, divorce, health, move, etc.
• Business is large enough to attract professional business buyers.
• A business will need to reliably generate $500k+ in earnings to support the income
needs of a new owner and the debt repayment required to finance a transaction.
• A quality business which can continue to grow under new ownership.
• A relevant and needed product or service with stable or growing revenue
• Key employees who will continue with the new owner
• Little to no customer concentration issues
• Clean financial statements and tax returns
• No legal, tax or other potentially impactful liabilities

7. Advantages of a Broker
• Faster Deal Closure
• Existing Buyer Network Facilitates Buyer Competition
• Defined Process and Standard Deal Terms
• Coordinated Service Providers (Attorney, CPA and Financial Advisor)
• Higher final transaction value and more cash in deal terms due to
buyer competition
• Signals deal quality to buyers as an experienced 3rd party is engaged
• Less deal risk for buyer and seller by having a 3rd party involved
• Experience brings more process, resulting in less headaches and
stress for all involved

8. Deal Terms and Valuation
• Valuation
• Services based companies typically receive 3-5x Earnings
• Products based companies typically receive 5-12x Earnings
• Deal Terms
• Usually, 80% of the purchase price is received as cash at closing. A 20% seller note @ 6% interest for 24 or 36 months is also part of most
transactions.
• But….
• Even sophisticated buyers, all provided with the same financial information, can have a very wide range of value calculations. The highest
offer can easily be 3x the lowest offer. Deal terms can also vary significantly from all cash at close to 50% or less cash with earnouts and
seller notes.
• Takeaway
• Until the opportunity is brought to market and buyers engaged, it is impossible to know exactly what the owner will receive in terms of
valuation, cash, seller’s notes and deal terms. This is why attracting multiple, simultaneous buyers and having a controlled auction is best
for the seller.

9. My Thoughts on Asking Prices
• The best buyers have plenty of capital and lack time. Getting them to
engage in an opportunity is key. These buyers can smell an
uncommitted seller miles away and avoid investing limited time
pursuing deals unlikely to close.
• An out of range asking price immediately signals an uncommitted
seller
• Seller doesn’t need to sell and will likely walk away after time and money has
been invested by the buyer
• Seller is a difficult personality who doesn’t accept that a market exists of
similar companies
• Seller keeps talking of ‘potential’ but fails to accept ‘actual’ results

10. Godfather Offers
• “Make me an offer I can’t refuse and I’ll sell you my company”
• Some companies do sell for very high multiples and we read about them in
the news. These deals are in the news because the transaction is
newsworthy. The sellers have unique technology protected by patents,
millions of users, well known corporate clients or something else truly
unique and special.
• These transactions almost always start by the buyer approaching the seller
directly. Since the buyer and seller usually operate in the same industry,
the synergy is known to all parties well in advance of any potential
transaction.
• If you aren’t being contacted by large industry players on a regular basis,
you aren’t likely to receive offers beyond a reasonable multiple of earnings.

11. David’s Business Terms
• Sole and Exclusive for 12 months with a 24 month tail on all NDA
signing buyers
• $1000 upfront marketing fee
• Helps cover the cost of marketing the opportunity
• Helps to disqualify uncommitted sellers
• No Retainer or Monthly Charges
• A “Success Fee” due on closed transactions

12. Seller Commitment
• This is my full-time job and I only get paid on the successful sale of a business
• I work with sellers who are committed to selling their company at a reasonable
valuation
• I will try to find strategic buyers (paying greater than financial value)
• Seller must accept or at least pay “success fee” for written offers at or above financial value
• Seller agrees to provide prompt responses to all inquiries via email
• Seller agrees to actively participate in drafting Information Memorandum
• Expect 5-10 hours of time invested in providing information and providing feedback and
edits.
• Seller agrees to actively participate in meeting potential buyers over Zoom
• Expect 30 minutes for each initial meeting and 60 minutes for follow-up questions before
receiving LOIs

13. Next Steps
• Sign Confidentiality Agreement
• Provide 3 Years P&L, Balance Sheet, Tax Returns
• Provide copies of long-term commitments
• Leases
• Customer contracts

14. Why Use a Broker?
• Incomplete packing attracts the wrong types of buyers
• Well capitalized business buyers are exceedingly short on time. Incomplete
materials will attract buyers with the time to piece together your
incomplete information. They will consume lots of your time requesting
various pieces of information and asking you to reformat that information
for their review. In the end, if they make an offer, it will likely be low due to
their lack of capital.
• Each buyer inquiry is very low probability
• Most Private Equity, Family Office and Search Funds look at 200-300
potential opportunities per year. They frequently only invest in 1 or 2.
Your chances of selling your company to a one-off inquiry is very, very low.

15. My Value Add
• I’ve sold enough businesses and spoken to enough well capitalized buyers that I
know what should be including in the promotional materials. I also know what
information is best kept for the Due Diligence phase of the process. My
presentation materials will allow the right types of buyers to quickly decide if
your business is a proper investment. The quality of the materials will signal that
further investigation will not be an exercise in frustration.
• I’m narrowly focused in my industries and maintain a network of well over 1000
potential business buyers specifically looking for the types of businesses I
represent. We’ve spoken on the phone, met over zoom and worked on previous
opportunities together. I’m a known quantity to them and while each one has a
very small chance of buying your company, with so many potential buyers in my
network, I typically generate 5-10 offers for each of my clients.