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Why spend $200M to purchase a company with $10M sales and 50 employees?

~𝟮𝟬𝘅!!! 𝗜𝘁 𝗺𝗶𝗴𝗵𝘁 𝘀𝗼𝘂𝗻𝗱 𝗹𝘂𝗱𝗶𝗰𝗿𝗼𝘂𝘀, 𝗯𝘂𝘁 𝗶𝘁 𝗶𝘀𝗻’𝘁. Welcome to the world of strategic mergers and acquisitions (M&A).

This was the case when LiveRamp, a public company with approximately 1500 employees, recently announced its plans to acquire Habu, a 5+ year old business with around 50 employees, for roughly $200M. Of this sum, $170M was paid in cash.

So, why would LiveRamp pay:

  • 20 times Habu’s sales when RAMP is valued at 3x?
  • Over $4M per employee?
  • 50% of its cash reserves?
  • 20 times its own Net Income?

𝗧𝗵𝗲 𝗮𝗻𝘀𝘄𝗲𝗿 𝗶𝘀 𝘀𝗶𝗺𝗽𝗹𝗲 – 𝗟𝗶𝘃𝗲𝗥𝗮𝗺𝗽 𝗶𝘀 𝗽𝗹𝗮𝘆𝗶𝗻𝗴 𝘁𝗵𝗲 𝗹𝗼𝗻𝗴 𝗴𝗮𝗺𝗲. The company is focusing on:

  • Tech: Habu’s cutting-edge data privacy technologies are invaluable in our current data-driven business climate.
  • Team: Habu boasts a respected team that injects high-quality talent into LiveRamp.
  • Growth: This acquisition has the potential to accelerate LiveRamp’s growth by creating new revenue streams.

The takeaway? When you’re selling your business, remember that 𝗶𝘁’𝘀 𝗻𝗼𝘁 𝗮𝗯𝗼𝘂𝘁 𝘆𝗼𝘂𝗿 𝘀𝗶𝘇𝗲; rather, it’s about the problems you’re solving for the buyer. 𝗧𝗵𝗲 𝗸𝗲𝘆 𝗶𝘀 𝘁𝗼 𝘁𝗲𝗹𝗹 𝘆𝗼𝘂𝗿 𝘀𝘁𝗼𝗿𝘆 𝗶𝗻 𝗮 𝗰𝘂𝘀𝘁𝗼𝗺𝗶𝘇𝗲𝗱 𝘄𝗮𝘆. By appealing to the buyer’s need for growth, innovation, and talent, you can unlock true value for yourself. 𝗡𝗲𝘃𝗲𝗿 𝗶𝗻𝗶𝘁𝗶𝗮𝘁𝗲 𝗮𝗻 𝗠&𝗔 𝗱𝗶𝘀𝗰𝘂𝘀𝘀𝗶𝗼𝗻 𝗯𝗮𝘀𝗲𝗱 𝘀𝗼𝗹𝗲𝗹𝘆 𝗼𝗻 𝗽𝗮𝘀𝘁 𝗿𝗲𝘃𝗲𝗻𝘂𝗲𝘀 𝗮𝗻𝗱 𝗽𝗿𝗼𝗳𝗶𝘁𝘀.

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