Certainty Beats Maximum Price

Shaan Puri and Sam Parr share their experiences about M&A deals, emphasizing that the certainty of closing a deal is often more valuable than getting the highest possible price. They learned this through their own acquisitions and stress the importance of having experienced advisors during the process.

Key Points:

• Deal Valuation Strategy:

  • Taking a lower but more certain offer can be better than a higher but riskier one
  • Shaan personally left $1.5-2M on the table to take a more reliable second-highest offer
  • 100% of a second-best deal is better than 0% of the best offer

• Critical Deal Factors Beyond Price:

  • Speed to close is crucial - delays increase risk of deal failure
  • Board approval status matters - deals pre-approved by boards are more likely to close
  • Team retention possibilities should be considered
  • Commute and other practical factors can influence decision

• Risk Management:

  • Disclose potential deal-breakers early
  • Be upfront about company issues and "skeletons in the closet"
  • Building trust through transparency is more valuable than hiding problems
  • Problems will be discovered eventually during due diligence

• Real World Examples:

  • HubSpot CEO's accident shortly after deal close showed importance of quick closing
  • Economic changes can derail deals
  • Key deal personnel leaving can impact closure
  • Different buyers (PE firms vs public companies) have different approval processes and reliability

• Deal Process Management:

  • Slower, more thorough buyers often more reliable than fast-moving ones
  • Retrading (changing terms late in process) is a major red flag
  • Having proper board approvals increases likelihood of close
  • Individual founders can be less reliable than institutional buyers