Hi, it’s Thomas from Positive Capital, M&A advisory dedicated to VC-backed companies.
Today, I’'m sharing an observation about the difference between what a buyer can create with an asset and what a founder can capture for it.
“If you truly believe the strategic value is there, then valuation should not be the problem.”
I often hear a version of the same sentence from founders as a valuation argument. A way of saying: if this asset can be worth so much more to them, then they should pay for that.
There is a lot of truth in it. But over time, I have become more careful with that sentence because on one hand, strategic M&A exists because an asset can become more valuable in one owner’s hands than in another’s. Otherwise, there is no real reason for a strategic premium.
But on the other, it subtly reframes the discussion around a different question without making that transition explicit.
- The first question is: how much value can buyers create with the asset?
- The second question is: how much of that value can founders capture in the deal? Those two questions are related. They are also very different.
From the founder’s side, the logic feels intuitive. The asset unlocks something the buyer could not do as quickly, as credibly, or as efficiently alone. Without the company, the buyer may need years of product development, several failed internal initiatives, a slower market entry, a weaker offer, or a less convincing story for customers.
So the founder thinks: the value is obvious.
From the buyer’s side, the same opportunity carries a different weight.
The buyer still has to integrate the product. Retain the team. Align the roadmap. Put sales resources behind it. Train account managers. Migrate customers. Absorb technical debt. Reconcile pricing models. Navigate internal politics. Convince the product organization that the acquired company is not just another object to be swallowed by the roadmap. Keep the founders motivated long enough for the thesis to become real.
The buyer sees the upside, but also the path to get there.
And, I strongly believe the more founders think like buyers, the more value they can extract from them.
Founders often believe they are selling synergies. In practice, they are selling access to potential synergies. This distinction matters because synergies are not sitting there, already realized, waiting to be transferred from buyer to seller. They still have to be created. The acquisition may make them possible, but the buyer will usually fund most of the execution.
That is why the sentence from buyers “we don’t want to pay twice for synergies” comes back so often — which is a fair point:
- They pay once to acquire the company.
- Then they pay again through integration costs, management attention, retention packages, roadmap disruption, commercial execution, and the risk that the expected synergies arrive later than planned, smaller than planned, or not at all. So when founders ask to be paid upfront for the entire synergy case, the buyer hears something slightly different. They hear a request to transfer the benefit of a future they still have to finance and execute.
But that does not mean founders should only be paid on standalone metrics. There are situations where it was not the case and they share a common context.
And it all comes down to scarcity.
When making an assessment buyers will look for alternatives to achieve the same outcome. If buyers have ten ways to reach the same outcome, the founders’ ability to capture value is limited.
I used to think scarcity in strategic M&A was mostly about the asset itself. A unique technology. A proprietary dataset. A product capability the buyer could not easily replicate.
Sometimes it is that. But in many software deals, the more decisive form of scarcity is less technical.
It comes from the buyer’s conviction that this particular team can help make the plan work. Most strategic plans look good in a model. The problem is rarely the spreadsheet.
The problem is execution:
- Can the product actually be integrated?
- Can the roadmap survive inside a larger organization?
- Can the founders work with the buyer’s product team without turning every decision into a conflict?
- Can the commercial teams understand what they are now supposed to sell?
- Can the acquired team translate the opportunity into the buyer’s language without losing what made the company special in the first place? When buyers believe the answer is yes, the company is no longer just one possible asset among others. It becomes the asset attached to the people the buyer trusts to reduce the risk of the whole initiative.
It is the scarcity of a believable execution path.
Thanks for reading Deal Making Intel! Subscribe for free to receive new posts and support my work.
More related posts: