Possible Acquisition of competing Product

Discussions
#1

I’m currently searching for advise on a possible acquisition of a competing product. The situation is:

The only competing product with a similar USP has mostly stopped development 6 months ago as the founders have moved on to a different company (there is no team in place for the existing product) so I reached out to see if they are up to a possible aquisition / partnership. They came back to me with a yes and lots of details about the business.

  • They still have revenue mostly from maintainance renewals (this is a desktop software not a SAAS).
  • They have around 25000 leads and 1300 customers
  • 2-3 features would be a great addition to my existing product

So the aquisition would be less about the technologie and mostly about aquirering customers / leads. They sell mainly through word of mouth but the SEO benefits would still be there.

My question is, how do I make up my mind about wether this is a smart move? How would I try to minimize the one time payment and instead offer some kind of deal with maybe revenue sharing for a time (or something totally different).

Anybody experiences / opinions?

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#2

What you want, is their clients and their LTV.
As you do not care for the software at all ( and those features I guess you will have to re-code them ), ask them to buy the customers.

How?
You go ahead and pay them, the LTV of the client for a year, if the user re-new or want to move over to your platform. The ways you can do that are many, but into my eyes, it is a certain way to manage know, how many of those total 2.500 leads and 1.300 customers will keep paying for you. Because if you pay more than should and never re-coup, no effort.

Also, do you want to buy the brand?
What is their domain value, backlinks, any content etc?

#3

No they don’t really have a strong brand at all. The only valuable thing here would be the possible SEO benefit.

#4

Then you either go for

Total LifeTime Value / 2
or pay per user who selects to move to your platform.

#5

I’ve seen Jay Abraham talk about this all the time. There are about 4-5 ways to go here including just offering a revenue share of all future customers.

What’s their churn rate eg at what stage with the business we worth almost nothing for them?

Can you think of an offer that pays nothing upfront but has a backend upside for them and you to minimise your risk of overpaying?

How bad do you want it and how badly do they want to get rid of it?
Answer these 2 questions and you might have the sweet spot.