Case study: SaaS business exit (Interview)

Jan 30, 2024

“I honestly think that if Nextoria wasn’t involved, this transaction would not have happened.”

Ole is an experienced business founder and serial entrepreneur who hired Nextoria to help sell his SaaS business he had been operating for 7 years. In this interview, he talks about his experience working with Nextoria on his exit, and shares about how having an advisor by his side impacted the process.

How did you decide to work with Nextoria?

I first tried to sell my 7-figure software business by myself around August of 2022. I received 3 offers, and I accepted the best one. Unfortunately, after a few months of due diligence, and investing a great deal of my own time and effort into the process, the buyer had a change of heart and decided to walk away. So after all that work, I was back to square one. 

In February 2023, I made the decision to reopen discussions with the buyer who had presented the second-best offer. Around the same time, Nextoria happened to reach out to me. Given the frustration I had experienced during my initial attempt, I thought it might be beneficial to enlist the services of a professional advisor to guide the process, so I decided to engage in a conversation with them to see if it would make sense to work together

After a couple of conversations, I decided that bringing Nextoria on board could really help with the process, considering their experience and deep understanding of both the business and my specific circumstances. Given my existing relationship with the second buyer, we decided that I would continue to lead that conversation (with Nextoria’s support) while they would bring in additional interested buyers in case that one didn’t work out

How did things change when Nextoria started getting involved?

First, Nextoria began by assisting me in negotiating with my existing buyer behind the scenes. They went over our entire communication history and pointed out the things that they believed were important to address in my negotiations. Eventually, the buyer told us that they couldn’t honour their initial offer due to a change in strategy: They asked for a significant reduction in price and, at that point, it was clear that their offer was no longer going to be acceptable to me.

This is when Nextoria completely took over the exit process.

First, they prepared all the materials, business presentations, and financials that we shared with buyers. They were very efficient, and I didn’t have to do much at all during this part of the process. One of the things that I liked is the fact that they spent the necessary time to really understand my business well to lay out the best possible story for buyers. For example, after I identified opportunities to increase revenue by executing a few changes to the business’ pricing structure, they looked into our numbers to help quantify the impact and risks of those changes so that we could make the strongest argument to buyers. 

Then, they started reaching out to more buyers, including the third buyer from my initial round of offers. While negotiating with them, Nextoria quickly identified several win-win opportunities and proposed some adjustments to the initial deal structure. Nextoria’s team was so successful in these talks that they convinced this buyer to increase its offer by more than 30%. Even after deducting Nextoria’s commission, the third buyer’s final offer ended up being higher than the two best offers that I had received up to that point! 

This literally happened within 2 weeks of Nextoria taking over. Because of my previous experience, I very much wanted to close a deal as soon as possible, and I was quite tempted to immediately accept this offer. However, Nextoria convinced me to talk to a few more buyers before making a final decision. 

I gave Nextoria the green light, and they began bringing new buyers to the table quite quickly. One of these buyers made an offer that was initially lower than what I had pending, but Nextoria negotiated with them, and within days they came back with an improved offer that was way better than the other one. Under the new offer, not only was the buyer’s upfront payment the highest I received, but the proposed future payments had the potential to bring the deal’s total value to ~30%-50% above every other competing offer. Nextoria also helped negotiate terms in the contract to limit the risk for the future payments, and to limit my involvement during the transition (the other buyer wanted me to stay on board for 12 months).

My decision was quite easy at this point, and I signed an LOI with the new buyer that Nextoria had sourced and vetted.

What was your experience with the due diligence process?

Nextoria’s team were extremely thorough and persistent during due diligence. It was important for the deal to close as soon as possible so that the new buyer could take over and start pushing on growth, so Nextoria wanted to make sure the due diligence wouldn’t take too long. They successfully negotiated an exclusivity period that was shorter than the buyer’s initial ask, so we were able to push on if the due diligence didn’t pan out as planned

During the due diligence phase, Nextoria stayed on top of all communications with the buyer and helped respond to all the data requests. This made the process quite smooth overall, but there were still a few things that needed to be dealt with, and Nextoria handled them all with an exceptionally knowledgeable and professional approach.

For example, towards the end of our exclusivity period, the buyer insisted on bringing in a 3rd-party auditor, ostensibly at the request of their investors. This would have extended the due diligence period beyond the agreed timeline. The buyer also rehashed a previous concern that our growth was currently slower than before the LOI was signed. The latter point was actually something that we had been very transparent on from the beginning of the process, as Nextoria had flagged it as something that could be used by a buyer as leverage during the due diligence to try to lower the amount of an offer. If it had just been me on my own, I’m not sure I would have been able to push back on either issue, but Nextoria handled the conversations with the buyer and was able to take a very strong stance on these points and hold the buyer to their initial offer.

Nextoria and I also brainstormed on ways we could address the buyer’s concerns about growth, including identifying some quick wins that could help improve it. While we didn’t end up having to take any actions, I really appreciated how proactive they were on this issue. It was great to have them in my corner as a thought partner, and I really felt like we were on the same team.

What about the final contract negotiations?

That happened in parallel with the due diligence and it was actually way more complex than I expected. There were a number of clauses in the first draft of the Asset Purchase Agreement that I wasn’t comfortable with at all, and If I was running the process by myself, I might very well have walked away from the deal. When signing an APA of this size, you really want to be on top of every clause to avoid surprises later on.

Nextoria’s role here was essential to help me understand what was standard, what I should push back on, and how to find the right balance between risk and reward.

They were able to translate what we received and explain the buyer’s perspective in a way that made sense, but they were also there to draw lines in the sand wherever it was necessary. They basically seemed to know where we had a chance to negotiate and where it was going to be difficult to gain something, and they pulled the right levers at the right time. 

For example, because the buyer’s offer included an earn-out payment based on future performance, it was important to us that they take the appropriate steps to grow sales. This included following our recommendation to implement price increases which I strongly believed would boost sales. However, this is not the kind of thing buyers are comfortable committing to in the contract, which I totally understand. Thankfully Nextoria was able to work with them to cover this in the contract in a way that both sides were comfortable with.

How are things going now and what is your evaluation of your experience with Nextoria?

The experience has pretty much been flawless so far and I am extremely happy with my choice. Everything we agreed on has been respected and there were no surprises on either side because of how thorough we had been in every step of the process. The transition was even easier than I expected, and I only had to provide support for 2 months after the deal, instead of the 4 months we had agreed on! I’m still in touch with Nextoria to share thoughts about the post-closing price increases we agreed upon with the buyer, and the buyer keeps me looped in to how things are going, which I really appreciate.

I honestly think that if Nextoria wasn’t involved, this transaction would not have happened. Not only did they bring the ultimate buyer and negotiate a very strong offer in a short period of time, their work during this entire process was really invaluable. There were a number of occasions when the deal could potentially have fallen through but was put back on track by Nextoria’s ability to negotiate and always find constructive ways to move the process forward. Beyond that, it was so nice to have someone on my team that I felt like I could fully trust and who I felt had my back. It’s easy to underestimate how intense the exit process can be and Nextoria has made such a difference.

Ole T.