want To Sell Your Business To Yahoo?

How To Sell Your Business To Yahoo!

It’s clear to all, Yahoo !’s President and CEO Marissa Mayer has been on a buying spree. In the first eight months of 2013, Marissa led Yahoo! to complete no less than 19 acquisitions with a total estimated purchase price of $1.3 billion. So far, no other single buyer has closed more deals in 2013 than Marissa and her stable of Advisors.
Typically, entrepreneurs who intend to sell their business to buyers such as Yahoo! work diligently on their business model, profitability, and scaling opportunities. What may be surprising to these hard working entrepreneurs is that the targets Yahoo! set their sights upon didn’t worry much about such matters. In fact, they did one of three things that caught Marissa’s attention and ultimately closed a deal.
Whatever It Takes, Find a Way to Grow Through Technology
Yahoo! has double downed on mobile and social technologies in its 2013 acquisition binge. Twelve of its 19 acquisitions were in one of these two arenas, led by its well-publicized deal with Tumblr in May for $1.1 billion.
When Yahoo! started in the mid-nineties, access to the internet was from a dial-up telephone lines. Do you remember the sound your computer made while you wondered if the line you dialed was a toll call? Yahoo! was there. Now it’s betting big dollars that its future success is tied to mobile access, connecting with social apps, and understanding social connections via analytics. Despite Yahoo!’s past and its lack of technology development, it’s willing to focus on growing its business through acquisitions of other businesses that have done so.
Button Up Your Talent Tight
Yahoo! appears to be most interested in the target business’s talented employees because out of the 19 acquisitions so far this year, only five targets still have active businesses. The other acquired business’s staff have either joined the Flickr team or have been absorbed into Yahoo!’s workforce. Their webpage reads “Big News: We’ve Joined Yahoo!” and that’s it.
Regardless of the industry, top talent in any business may be its greatest asset or its weakest link. When it comes to selling a business, an entrepreneur may find himself in a precarious position if thoughtful employment agreements, stay-bonus plans or stock appreciation rights plans with key employees have not been established. By taking care of this important detail, not only does the likelihood of a successful sale increase, the entrepreneur may even be able to command a premium purchase price when the buyer needs talent and that talent is on his payroll.
Ignore Sales and EBITDA
With only a few exceptions, the businesses acquired by Yahoo! have not been around long enough to show ‘three year historical financial data’, which is the basis for EBITDA-based valuations which are commonly used in middle market transactions. And even if these businesses were around a while, their sales revenues didn’t appear to matter. If they did, Yahoo! would not have shut down the businesses shortly after the deals closed and redeployed its employees to other business units. Instead, it would have added the revenue to its own to improve Yahoo!’s financials.
Know What Matters and Motivates a Buyer
Not all businesses and industries are as ripe for such lucrative deals as those recently acquired by Yahoo!. However, by knowing what matters and motivates a potential buyer, the entrepreneur can increase his odds of selling his business for a premium to buyers such as Melissa.
Every entrepreneur has the opportunity to develop new markets regardless of how long they have been in the industry. Today, many new markets are being reached by the adoption of technology. By doing so, the entrepreneur positions their business in a place where acquirers with deep pockets may find them. Likewise, the entrepreneur also has the opportunity to hire, develop, and retain top talent.
To date, Melissa and Yahoo! have spent 1.3 billion with the lion’s share of it going to the owners of Tumblr. With approximately $200 million split between the remaining 18 acquisitions, the estimated average purchase price was $11 million.
The way I see it, Yahoo!’s current buying spree only confirms that every entrepreneur has at least 11 million reasons to pursue new markets by adopting technology, developing and retaining top talent and, above all else, persevering.