Why price depends more on the market and buyers than on your company
Many business owners I speak with believe that the price of selling their company depends on how good the company is. In reality, it depends on how unique or replaceable it is.
In a negotiation with an acquirer, your strength depends on how wide the acquirer’s Excel sheet of potential targets is, how urgently they need to buy something now, and how many alternative potential buyers you have.
As counterintuitive as it may sound, there is no intrinsic value in companies that sets the price. Instead, there are two external variables that determine it:
Together, these two variables determine negotiating power and, as a result, the ability to secure the best terms in a sale. Their combination creates a matrix with four different scenarios.
1. Small, generic, and in a non-consolidating market
In almost every market, the same pattern appears: a few large players at the top, a broader group of mid-sized companies in the middle, and a large number of small companies at the base. The structure usually resembles a triangle. The closer you are to the base, the greater the number of very similar alternatives.
One way to reduce the number of alternatives is to differentiate and specialize in a specific market or vertical. This introduces a certain level of uniqueness, although it usually also means fewer potential buyers, because there are fewer customers and lower growth potential.
That said, the worst possible scenario is being small, generalist, and operating in a broad market. If that market is also not undergoing consolidation, negotiating power is extremely limited.
A good example in software and SaaS is the martech vertical, which shows one of the lowest levels of consolidation through acquisitions. These are solutions with high churn and low long-term cash flow predictability. Although marketing is important, it is rarely mission-critical software for business continuity, and switching providers usually does not involve significant risk. This makes consolidation difficult, as buyers seek integrated solutions and customer migration often causes sharp portfolio declines.
In this context, for example, a company offering a solution to identify and contact influencers on Instagram, Facebook, TikTok, and X, with €1M in net revenue, is typically in a weak negotiating position. There are thousands of similar solutions worldwide, with very close value propositions, in a market with few active buyers and little consolidation. The result is that the company has very few real exit alternatives, while the buyer has many substitute options.
2. Small, non-differentiated, but in a consolidating market
There are markets that experience high levels of consolidation at specific moments. These are usually highly fragmented markets, with many small companies and almost none that have reached a meaningful size.
In these markets, waves of consolidation emerge at certain times. Typically, a first player starts the process and, once the strategy proves successful, other players replicate the model. In most cases, these are projects financed by national or international private equity funds.
These processes usually last for a limited period, often a few years. The best time to sell is not usually at the beginning, when there is only one active buyer, but in the middle phase, when several consolidators exist and the seller has more real alternatives.
These dynamics have already occurred in other sectors. They happened with ISPs in the early 2000s, with hosting companies during the Arsys, Acens, and other international groups era, and later with the consolidation of small telecom operators around MásMóvil and other players.
In these cases, missing the wave is often costly. In many markets, these processes do not repeat for decades and transform sectors that move from being highly fragmented to being concentrated in a few groups with strong brands and economies of scale.
When this context exists, small companies that under normal conditions would have little market and very limited negotiating power find themselves in an exceptional position to achieve at least a reasonable exit.
In this scenario, the differentiating factor is not the uniqueness of the company, but market timing.
Today, there are sectors such as property management firms, accounting and tax advisory firms, vocational training centers, dental and aesthetic clinics, or maintenance companies, where several groups are consolidating the market through roll-up strategies. The presence of three to five active buyers in Spain allows for some negotiating room for sellers.
There are also markets with dozens or even hundreds of potential buyers, such as mission-critical B2B software or IT consulting. In these areas, above a minimum size—say €2M in ARR for B2B software or €10M in revenue for IT consulting—the seller’s alternatives are extremely broad, although so are the buyer’s.
3. Differentiated, but with little or no consolidation
In this scenario, power comes not from the market, but from the company itself. These are clearly differentiated companies, leaders in a specific niche, a very defined specialization, a specific geography, or a particular point in the value chain. They are not easily replaceable, even if the market they operate in is not undergoing significant consolidation.
In these cases, the process usually does not start because the market is consolidating, but because a specific buyer appears at a very specific moment. It is typically an almost perfect strategic fit for that buyer at that time, rather than a systematic search for alternatives. The opportunity has more to do with the buyer’s timing than with the sector as a whole.
In this context, the seller may have some potential alternatives to approach if they decide to run a process, but the buyer often does not. Even if other similar companies exist in theory, it is unlikely they are available or open to a transaction at that same moment. This significantly reduces the buyer’s real options and limits their negotiating leverage.
An example could be critical technology providers within a specific production chain. For instance, a company that develops software and artificial vision systems for quality control in industrial production lines and has already reached close to €10M in ARR.
Once the company reaches a certain size and has a clear differentiator, its negotiating power becomes meaningful. In these cases, the buyer usually has very few real alternatives available, while the seller can at least hint that other potential interested parties exist if a process is launched. Even without a consolidating market, this imbalance allows some level of FOMO to be introduced on the buyer’s side and clearly increases the likelihood of achieving very favorable deal terms.
4. Differentiated and in a highly consolidating market
This is the most favorable scenario from the seller’s perspective. The company is clearly differentiated and operates in a market that is in the midst of consolidation, with multiple active buyers, available capital, and real urgency to execute acquisitions.
A good example is the cybersecurity sector, particularly specialized cybersecurity. This is a market with a very high level of consolidation, where international buyers, local groups, publicly listed companies, large technology integrators, and private-equity-backed platforms all coexist. All of them are looking to acquire very specific and differentiated capabilities, both for growth and strategic necessity.
In this context, companies specialized in cybersecurity solutions or products become especially attractive assets. These are businesses with high barriers to entry, deep technical expertise, and a clear fit within larger platforms.
In this scenario, competition among buyers is real and simultaneous. These are not theoretical comparisons, but processes where multiple players evaluate the same asset at the same time. This allows the seller to maximize not only price, but also deal terms and structure.
What we look at before starting a sale process
That is why, when we analyze how well a company can be sold, we do not limit ourselves to assessing its quality or level of differentiation. We analyze its competitive position, but we spend even more time understanding what is happening in the market, how many real buyers exist, and how urgent they are. In practice, the price and terms of a transaction depend far more on this context than on the company itself.
By Joshua Novick, partner at Bondo Advisors
Source: https://www.joshuanovick.com/p/tu-empresa-es-unica-o-sustituible
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