Negotiating a Private Placement
a Consensus case-study
Since, based on analysis, we predicted that an investment in our client company would complement and enhance the investors’ portfolio in ways that few other potential investments could, we felt that our client had a significant amount of leverage in the transaction. We also found that the client’s company valuation was supported by valuations for comparable companies, albeit at the higher end of the range.
At the same time, our research indicated that the companies with similar valuations were led by more senior business people.
We turned our attention inward towards the client, with substantial efforts to reconcile the founder’s expectations with realistic outcomes. We focused our attention on identifying the underlying drivers and psychological factors that were at play, including goals and self-image issues.
We then shifted our focus to the negotiation with the investors. After uncovering the investors’ underlying interests, Consensus closed the deal with a higher valuation than originally proposed by our client, and with a virtually-guaranteed future leadership position for the founder.
- The client closed the deal with a higher valuation than originally proposed by the client, relinquishing a smaller percentage of their company than originally anticipated
- The agreement included a forward commitment for an additional investment by the investor (subsequent round of financing)
- Through the mentorship by an interim-CEO, the founder would be primed to assume the chief role which was guaranteed to her (provided he and the company met certain milestones); meanwhile, the investor group was satisfied that there would be a seasoned CEO in place during a critical time in the organization’s evolution