Message from buyer to seller (Bill, co-founder & CEO)
As per our last conversation, we'd like to offer our bid at $20M for your internet website business. While this is lower than your stated selling price that we received from our mutual colleague (though not more than 40% lower than your offering price), we believe it can be a fair price taking into account current market conditions and future growth risk.
At an 8x revenue multiple (implying annual revenue * 8 = valuation of $20M), this already reflects a premium to many "established" companies - and among profitable internet companies, this is a healthy multiple.
Let us know if this is in the ball park range for a deal to be done.
Message from seller to buyer
Thanks very much for your bid.
$20M is much lower than what myself and my team were expecting.
We expect our business to grow quickly in the coming months and at a revenue multiple of 8x, the valuation bid is lower than the potential value which will surely rise much higher than $20M.
We are a team of entrepreneurs and believe in the success of our business. Perhaps we can negotiate in terms of stock and options in place of a 100% cash acquisition. We wish to be part of the identity of the business going forward, even after acquisition.
Message from buyer to seller
Unfortunately, as the current team has not been able to increase unique users and pageviews over the past six months, we feel we have the appropriate talent to bring this business to the next level and wish to keep the transaction in cash only - which means existing management would have no part in the business going forward.
We realize this is tough on you guys. After some discussion among our executives, we are willing to raise our bid by 25% to $25M, under terms that we have the right to replace existing management.
The buyer refers to a "transaction in cash only" primarily to
give the sellers a more liquid form of payment, in gratitude for all the work they have done thus far.
deny the buyers the potential upside value of the future company
introduce a new experienced team that would replace the incumbents during this next stage of growth for the company.
reward the sellers for the company they have created thus far while denying them a right to have an ownership stake or operational role after the company is acquired.
explain the importance of the strategic step of replacing existing management.