Want to sell your company for millions or even a billion dollars? Are you wondering about the things you must do to get your company acquired during an M&A process? Make sure you are on top of these ten things to make it happen.
Having worked with countless entrepreneurs, investors, interviewing the most successful founders with great exits on the DealMakers Podcast, and launching and selling my own businesses, I’ve found these ten things are the musts if you want to get your company acquired.
Remember that mastering the storytelling side and how you are positioning your business is critical when it comes to engaging and speeding up the process. This is done via your acquisition memorandum. This is super important to reach a successful acquisition. For a winning acquisition, memorandum template take a look at the one I recently covered (see it here) or unlock the acquisition memorandum template directly below.
1) Prove Your Model
Even if you’ve bootstrapped so far an haven’t had to hit typical milestones for raising VC money, you’ll need to have something of value to show.
That may just be the best talent or best-loved brand in your space. Though acquirers are generally looking for a proven business model. Even better if that is one which is already profitable.
Expect profitability to be even more important if there are any recessionary periods in the economy and things tighten up.
2) Network & Build Relationships
Just as with fundraising with investors, acquisitions typically take time. That may be a little shorter if Google is already banging on your door, making offers. Though for most startups there is going to be a substantial dating period, even if another party is already really interested in an M&A transaction. That may last months or even years.
The earlier you begin building these relationships and connections the better. It should begin years before you plan or hope to be able to sell as an exit option.
Of all the founders I’ve met and interviewed, only very few have really nailed it when it comes to positioning their business for a specific acquirer, and essentially forcing their hand. Josh Hix for example built the relationship with potential acquirers for several years before he sold his business for
Often, it turns out that your acquirer can be a far different party than anticipated. Oftentimes I’ve seen acquisitions come out of founders building relationships with the executives of their competition. They’ve maintained those connections over time, and it just happens. So, don’t exclude anyone from these efforts.
3) Have Your Paperwork Right & Story Ready
Small businesses can be really unorganized. That’s what generally keeps the majority as just small businesses versus high growth startups that can achieve great exits. A good idea is to keep all the documents structured by folders in a service like Dropbox.
It’s a lot harder and more expensive to try and catch up and correct things later too. You’re also going to be dealing with very savvy and process-oriented partners in an acquisition. They’ll instantly spot big red flags in your accounting, etc.
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Start right, or get on getting it right today. From the right type of corporate structure to accounting records and everything else. Having your paperwork in great shape will make an acquisition more likely, offers stickier and will speed the process along much faster too.
When getting acquired by a larger company storytelling is critical for a transaction to happen and having a solid acquisition memorandum that captures the essence of the business is key. For a winning acquisition, memorandum template take a look at the one I recently covered (see it here) or unlock the acquisition memorandum template directly below.
ACQUISITION MEMORANDUM TEMPLATE
4) Institute Smart Practices
Building on the last point, strive to institute practices which make an acquisition feasible and easy for the acquirer. Do it early.
Integration and assimilation is a huge problem for acquirers. In reality, most acquired companies fail, because it is just so hard. In fact, if your acquirer really knew the odds of things working out for them, they probably wouldn’t even attempt it.
Fortunately, there can be a lot you can do in technology, systems, and integration tools, to make a merger far simpler and faster. Plus, you really want your venture to continue to succeed after a sale.
For example, if you know the types of software your potential acquirers are using in your space for different parts of operations, it can make a big difference if you are running on them too. It will instantly make you more attractive, and a better contender among your peers.
5) Get & Keep Your Team on Board
Potential M&A deals can be very delicate. Some choose to keep their teams in the dark. There can be reasons for that. Yet, they are going to figure it out at some point. They are a lot less likely to freak out or make the wrong assumptions if you are transparent.
Peter Rahal, for example, sold his company for over $600 million. In his case, he shared on the DealMakers podcast that he did tell his employees from the start of the negotiations that a potential acquisition was in the works. He company was acquired by Kellog‘s.
When it comes to the due diligence it’s going to be in their face anyway. You need them to be unified and bonded together to make it through, and without having to renegotiate your position into a much less tasty slice of pie. Communicate, communicate, communicate.
6) Keep Showing Up & Proving Yourself
Stay visible and keep proving you can do what you say. Most don’t and can’t. This alone can make all the difference in drawing great offers from the best acquirers.
Keep potential buyers and investors tuned into what you are doing and are planning next. Then do it, and exceed where possible.
This one simple factor is so rare today that it will make you stand out.
7) Be a Must
Don’t just be nice to have. Be a must for them to acquire.
It will bring those offers, better offers and make them stick.
Ask yourself the following:
Why must they acquire your startup? Is your brand dominating? Do you have the technology they have to have, and it is cheaper to buy you than to start from scratch? Are you providing essential growth or profitability they need to show to their investors?
8) Be Mentally Prepared for the Due Diligence
As inspiring as the opportunity for a big exit can be, the truth is that 99% of the time, surviving the due diligence is going to be the toughest trial of your life yet as I covered in Forbes not long ago.
Whether it is the tedium of digging through every document and stat that flows through your business over the next six months, having strangers in your office every day, middle of the night calls to lawyers in a different time zone every single day for months, or even just having your acquirer go dark for weeks, count on some stress. Be mentally prepared for it.
9) Don’t Sabotage Yourself Before it Closes
The acquisition process can soak up huge amounts of time and energy and attention. It can be a full time job by itself.
Though to cross the finish line you’ve got to keep up all of your other numbers and traction just as before. Be careful not to accelerate your monthly burn rate too much, in case the closing is delayed or falls apart.
10) Mentally Prepare Yourself for What’s Next
Get comfortable with what’s next so you don’t panic, and sabotage or stall it in the last inning.
Will you be tied into working for someone else during a resting and vesting period for several years? Will you have the freedom to launch a project immediately? Or, can you be comfortable with taking months or years to travel and find the perfect thing to do next?
If you are looking to get your company acquired and run a successful M&A process, a great acquisition memorandum template like the one below should provide the right guidance so that you build your own and make all the difference.