(Image credit: Getty Images)
Meta raised eyebrows in December when it was reported that the social-media giant would pay upwards of $2 billion to acquire Manus, a small agentic AI company out of China — an eye-popping price that many critics have since decried as an overpay.
But one man’s overpay is another’s opportunity, and sellers that get too caught up in valuations of their company based on comparables — rather than creativity — risk losing out on huge upsides and leave millions of dollars on the table.
The problem with comparable company analysis
The use of comparable sales to value companies as they enter the M&A market has become standard practice thanks to a market that’s been built by and around financial buyers — savvy readers of the market but often also individuals that are limited in their approach to valuations.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
To these financial buyers, businesses’ values are summarized through a series of calculations based on assets, EBITDA, and comparable transactions — in other words, mathematical past performance instead of future integrated values.
It’s a system that keeps deals flowing, but also one that rewards backwards-looking certainty over forward-looking possibility.
Rather than understanding the value of a company as being the amount a buyer is willing to pay, the value of a company is predetermined, based on what buyers have paid for similar companies in the past.
The issue with this valuation process ignores a simple truth: A business is worth different amounts to different buyers, depending on what they can do with it.
Strategic buyers routinely pay materially higher takeover premiums than financial buyers for the same kind of asset, precisely because they are underwriting synergies that will never show up in a standard multiple screen.
Sellers who don’t think through those differences in advance inevitably under transact on what they have to offer.
What could your business be worth to the right buyer?
The tendency to look backward as owners position their companies for a sale is a significant part of why so many founders report walking away from their exits with a sense of regret — up to 75% in an Exit Planning Institute survey.
Even when the transaction looks successful on paper, it can soon feel like a missed opportunity for owners who have committed so much of their life, their talent and their capital to building a company.
Rather than being a practice in calculation and comparison, M&A should be a practice in creativity and strategy as sellers consider what their business could be worth in the hands of the right buyer.
It’s the difference between selling an apple orchard for its value as an apple orchard where people can come and pick fruit in the fall, vs selling an apple orchard to a snack manufacturer who wants to be able to source their produce in-house.
The value of the orchard is real either way, but the assets are worth significantly more to one buyer than the other.
Valuations grounded in what businesses have historically produced assumes any additional value is speculative — which is often not the approach buyers have in coming to the market.
Buyers who consistently capture post-acquisition upside invest time and resources in understanding how an asset could be repurposed, scaled or embedded in a larger system.
Comparables and EBITDA may not say that Manus is worth $2 billion today, but in the context of Meta’s race to dominate AI, it may well be.
Reframing the valuation process
Whether it’s because of what they offer in a given technology, geography, or service niche, companies are regularly able to outperform what comparables say they should fetch by approaching the market with a more strategic approach.
To the right buyer, a chemical manufacturer in the right geography can sell for 100% more than even its owners expect.
Instead of asking, “What is my business worth?” owners should ask, “Who should own this business next and why would it be worth more in their hands than in mine?”
That question reframes the entire process. It forces a deeper examination of the company’s underlying capabilities rather than just its current outputs.
Answering it requires stepping outside the role of operator and thinking like a strategic acquirer.
- What capabilities does the business have that could be amplified inside a larger platform?
- What customer relationships, processes or intellectual assets could unlock new revenue streams elsewhere?
- What constraints disappear when the business is no longer standalone?
The irony is that this approach often leads to better outcomes for both sides. Sellers capture more of the value they created. Buyers enter the deal with clearer expectations and a more realistic path to execution.
Fewer assumptions are left unstated. Fewer opportunities are discovered only after closing.
Businesses inevitably change hands. But whether the exit rewards the seller who built the asset or the buyer who recognizes its utility depends on who does the strategic work first.
The owners who come out ahead are the ones who start early, get clear on how their company could be worth more to the right buyer than it is to them, and assemble the team to turn that insight into leverage.
That’s how owners walk away with a deal that reflects the full value of their business — not just the market they happened to sell into.
