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In this episode of the SaaS Buyers Club, Kirk Michie, Managing Partner of Candor Advisors, shares his three decades of experience helping founders navigate strategic exits. Kirk Michie introduces his trademarked philosophy: the buyer of your business is a full-time predator, and you are part-time prey. The discussion covers why a signed Letter of Intent is actually a ceiling for price rather than a floor, the hidden traps in earnouts and deal structures, and the behavioral nuances of selling to strategic versus private equity buyers. Kirk Michie emphasizes that founders must “armor up” with specialized legal and transaction advice to protect their wealth and their legacy.
Episode Transcript
The Predator and the Prey: Navigating the SaaS M&A Jungle
When a SaaS founder decides to sell their company, they are often entering the most lopsided negotiation of their lives. As Kirk Michie of Cander Advisors explains to Omeed of Optimist Legal, professional buyers—whether they are private equity firms or corporate development teams—do this for a living. They are full-time predators, and the founder, who may only sell a business once, is the part-time prey.
The LOI is a Ceiling, Not a Floor
One of the most dangerous misconceptions a founder can have is that a signed Letter of Intent (LOI) is the starting point for a price. Kirk Michie warns that an LOI is a ceiling. Once it is signed, the price almost never goes up; it only goes down as the buyer “discovers” reasons to chip away at the valuation during due diligence.
To prevent this, Kirk Michie recommends that founders professionalize their financials long before they receive an offer. This means moving past a basic QuickBooks download and performing a Quality of Earnings (QoE) report to establish a firm Adjusted EBITDA. If you haven’t done this work, a buyer will use their own financial model to define your value in their favor.
Deal Structure: Cash is King, Earnouts are Risk
Kirk Michie highlights that the “sticker price” of a deal is often a distraction. Predators use deal structure to drisk their investment. They prefer to offer:
Lower Cash at Closing: To keep leverage on the seller.
Contingent Payments: Such as earnouts based on future forecasts that are often “traps” designed on the back of an envelope.
Rolled Equity: Where the founder keeps skin in the game but loses control.
The reality of earnouts is sobering. Kirk Michie notes that according to many M&A experts, founders only achieve their full earnout about 20% of the time. His advice is clear: assume you will never see the earnout. If you aren’t comfortable with the cash proceeds at the moment of closing, don’t sign the deal.
Strategics vs. Private Equity: Knowing Your Predator
The experience of selling differs wildly depending on who is across the table.
1. Strategic Buyers These buyers often offer higher multiples because they can immediately realize value by folding your EBITDA into their larger P&L. However, they are prone to “gaslighting” founders about what happens after the sale. Kirk Michie warns that strategics will often “obfuscate” their plans to cut duplicate roles—like your CFO or HR team—to achieve what they call “synergies.”
2. Private Equity (PE) Buyers Private equity firms sell the dream of a “second bite of the apple” through rolled equity. They promise operating expertise and strategic guidance. However, Kirk Michie points out that PE firms rarely have your specific operating expertise. If a buyer asks you to roll 40% of your net worth into the new entity, you have the right to do due diligence on the buyer. Ask to see their Internal Rate of Return (IRR) and the track record of their other portfolio companies before committing your wealth to their hypothesis.
The Six Secrets to a Successful SaaS Sale
Kirk Michie concludes with a checklist for founders looking to secure a better outcome:
Understand Your Why: Be clear on whether you are selling for retirement, burnout, or opportunism.
Align with the Buyer: Ensure the buyer’s post-sale plans match your goals for your employees and legacy.
Professionalize Financials: Don’t argue with the market; present your business using SaaS valuation multiples and transferable economics.
Control the Information: Don’t share sensitive data without a non-binding indication of valuation.
Seek Guidance: Don’t do it alone. Use peer groups like Vistage or YPO and hire specialized advisors who have the “scar tissue” to protect you.
Trust the Process: M&A is behavioral. Hire a “Gladiator” to fight for the “Future You” while you focus on running the business.
Ultimately, a successful exit is about more than just the money—it’s about protecting the legacy of the business you spent decades building. By recognizing the predatory nature of the market and armoring up with the right team, SaaS founders can turn the tables and exit on their own terms.