They Got Acquired - Founder fatigue led to this exit

July 23, 2024
​Read on web​

Sometimes an offer comes along at just the right time.

That’s what happened for the founders of Green Market Report, a cannabis news website they’d launched four years earlier.

“I was suffering from founder fatigue and was struggling with creating a steady flow of revenue,” said Debra Borchardt. “I didn't have the money to invest in the company and was just running it hand-to-mouth.”

So she and co-founders Cynthia Salarizadeh and Vince Pitetti sold to Crain Communications in 2021.

Borchardt was unable to disclose the sale price, but said it worked out to 3x annual revenue, which is about average for content sites.

Borchardt stayed on with the buyer as executive editor, while her co-founders departed the business. She said that was the hardest part of the acquisition, and she advises other co-founders to be clear about their desired outcome.

“Some business partners want to build, sell and move on, while others want to build, sell and stay a part of the business,” she said. “ I think it is important to make [sure] these goals are made clear when creating the company.”

Here’s our full story:

​An unsolicited offer for this cannabis news website came along at the right time​

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– Terrell Johnson, who sold Half Marathon Guide in 2022

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Moral of this story: Find a broker you like early, and work with them toward your ideal sale.

Behind the business

Here’s the truth about strategic deals…

They are RARE.

It doesn’t seem that way because most of the acquisition stories that get coverage are big wins. So that’s what we hear about.

The problem is, those rare, often talked-about deals create unrealistic expectations for founders.

We start to believe it’s normal for buyers to overlook whether you’re profitable, or for a business to sell for 16x revenue.

In reality, those deals are outliers.

***

Most founders I talk to say they’re not looking for a regular buyer; they’re looking for a strategic buyer.

Which is smart; you should absolutely look for a strategic buyer!

But don’t fall into the trap of thinking a strategic deal is likely.

👉 Most strategic deals originate when the buyer reaches out to the seller. Not the other way around.

Deals prompted by a strategic buyer work because the buyer is perfectly situated to do that deal. They see clearly how the business would fit into their strategic vision; they have the money to make the acquisition; and they have the resources to integrate the purchased company into their own.

But if you’re the seller approaching potential strategic buyers, so much has to fall into place for those deals to go through. It’s hard to engineer that fit and timing.

Plus, usually when founders say they’re looking for a strategic buyer, they mean a buyer who will pay above market rate. You might find a strategic who checks the other boxes, but they’re not willing to go out on a limb and overpay for the business. There’s a gap between what the founder is willing to take and what the buyer is willing to pay.

***

BUT. Here’s a great thing about strategic buyers…

Even if they can’t meet the price you’re looking for, just having them as an interested party could help increase the value of your business. Competition gives you leverage.

That’s what happened to me when I sold a business in 2021. It was a website for writers, and I’d had inbound interest from several competitors.

I eventually realized I didn’t want to sell to either of the buyers who’d approached me, but their offers helped me set a new anchor on price, one that far exceeded what I would’ve gotten for a multiple of SDE or revenue. I was then able to use that interest to entice another buyer, who ended up with the winning bid.

I didn’t realize it then, but now I know how lucky I was to have that inbound interest. Yes, it was also a result of consistent effort — we were one of the top players for SEO in our niche — but I doubt we would’ve sold for as much without it.

All this to say: Go for the gold. Go for the strategic. But be realistic about the odds of that type of buyer coming through with your dream deal. And if the magic doesn’t come together, be open to a Plan B.

See you next time,

Lexi Grant
Founder & CEO
​They Got Acquired​

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