The Real World Scenarios vs. The Pie in the Sky

In today’s M&A market, valuations in automotive (particularly auto services) are strong yet scattered. Private equity platforms are paying aggressive multiples to enter the space, while strategic buyers remain disciplined with strong but fair offers. Sellers who understand the trade-offs between valuation, certainty of close, partner fit, and post-transaction life tend to come out far ahead.

Below are three anonymized mini case studies. Each case study illustrates a different set of choices owners face when taking their business to market.

Challenge:

A multi-location auto services operator decided to test the market. Within weeks we had several indications of interest with valuations ranging from low to mid-single digits up to double digit EBITDA multiples.

Options & Key Decision Factors:

1. Lower offers came mostly from new financial entrants trying to “buy their way in” with heavy equity-roll requirements (20–30%) and vague hold-period language.
2. Aggressive offers came from established platforms that understood the space, required little or no seller roll, and planned long holding periods with continued investment into growth and an eventual exit.
3. Strategic buyers come in high and fair with 100% cash at close, immediate liquidity, and the ability to stay involved (or walk away) on the seller’s terms.

Outcome:

The owner chose a strategic buyer; the two biggest drivers: (1) 100% certainty of close with no financing contingency, and (2) the ability to stay on as a consultant/industry expert for 12 months and then fully retire. Months later, market conditions cooled and the seller’s “lower” multiple ended up being the highest real dollars received among comparable offers,

What I learned:

In a frothy process, the headline multiple often isn’t the one that hits your bank account.

Challenge:

Two neighboring businesses (different management styles, different margins, slightly different customer mixes) wanted to combine and go to market together to create a larger, more attractive platform and capture the absolute highest multiple possible.

Options:

1. Sell the combined entity to a financial buyer that will likely give the highest valuation but heavy integration risk in the buyer’s eyes and a longer, more painful process if it doesn’t fall apart at the end.
2. Sell to a strategic consolidator at a slightly lower multiple but minimal integration risk and significantly faster close timeline.

Outcome:

The groups chose the financial route for the extra 25–30% of proceeds. It took months of diligence theater, offers that were revised downward. Ultimately the deal got done but it was incredibly difficult, and the deal ‘died’ multiples times throughout the process. The risk was real and there were several moments where it was not going to happen.

Lesson:

When combining separate businesses, get the owners 100% aligned on timeline and risk tolerance. Know your integration story from the jump to stay ahead of possible risks.

Challenge:

A sharp and young owner had built a fast-growing operation but was under-capitalized for the next leg of expansion. He wanted both to take some chips off the table alongside the ability to keep swinging big.

Options Considered:

1. Sell 100% and walk away with a great valuation.
2. Sell 100% but stay on as an employee.
3. Recapitalize with 80–90% sold today and a minority stake plus a second bite in 3–5 years.
4. Sell a true majority stake but roll a large enough piece into the new platform to participate in the next iteration (5–10-year horizon).

Outcome:

The seller chose option 4 with the platform that offered both the highest valuation and a growth plan that matched the vision. The owner sold ~70%, rolled the rest into the new entity at the platform multiple, with institutional capital behind the company. Projected second bite will likely be 3–4 times had the company taken the 100% cash offer.

Lesson:

For owners who still love the game, the “second bite” can dramatically outperform the “one and done” if you pick the right partner. The key here is to “date” the different bidders and ultimately find the partner you want to “marry”

Every process has three variables that matter above all else:

1. How much money actually hits your account (not the headline multiple)
2. How certain you are to get there
3. What your life looks like the day after closing

The key is to get those three variables correct in the right order for you personally, and everything else tends to fall into place.

Curious what these real-world valuation dynamics mean for your business? Connect with me anytime and I’d be glad to give you a confidential, no-pressure assessment.