How can you grow your company through acquisitions?
There are several ways to translate this question. So let’s look at all of their applications. Including, how to continue growing your company when you received an offer to buy your company, how to grow a startup by selling your business to another organization, and how to use acquisitions of other companies to grow yours.
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.
Acquisitions Are Not Just An Exit
Acquisitions are not just a golden parachute for bailing out of the company you started. They can be a highly efficient and effective growth strategy. Even if you’ve been offered a lot of money by a larger company wanting to buy yours, that doesn’t mean the necessity to grow has been lifted from your shoulders either.
You’ll Likely Keep Working For Your Buyer For A Few Years
In many cases founding entrepreneurs will be required to stay on and work as employees for their buyers for several years. A substantial percentage of the price can rely on this. Especially compensation for the founders. Not only does that mean clocking in every day, but also hitting very aggressive growth performance metrics and milestones during this period.
Can Be Leveraged Turned Into A Larger Acquisition Opportunity
If you are paid in stock in your acquiring company for your business, this may be parlayed into an even bigger payout if their strategy is a follow up exit, and sale of their business or IPO. Your ability to grow your subsidiary company, or the parent company as a whole during this time period can have great compounding benefits on your net gains. It is worth having the conversation about their pending plans around this, and what specific metrics or milestones they are trying to hit to get to that point.
Of course, how much you actually personally net will depend a lot on when you actually sell and cash in your stock. There can be dramatic peaks and troughs around acquisitions and IPOs. Be sure you also know any restrictions on the timeframes for selling your shares, and how many you can sell.
A Chance To Embed & Learn WIth A Bigger Company
While true entrepreneurs never make great employees for long, some do appreciate the opportunity to embed themselves with their acquirers and grow their own knowledge, skills, and resume at the same time.
If you went straight into business on your own without working for anyone, this may be the chance to see how big, successful corporations operate at an incredible scale. Some find it helpful for creating their second startups and designing them to be even grander than the first.
Going to work for Google or Microsoft may be classic examples of this.
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A Path For Growth
In many cases the decision to sell a business actually comes down to it being the best way to grow it. If your priority is the mission, the customers and product, then this may be the best way to grow it and maximize the impact you set out to have. It can take a strong and humble entrepreneur to make this move, but it can also come with a great payday and legacy too.
Having your company bought doesn’t necessarily mean that you have to sell everything. In fact, you may just end up selling off some of the assets, technology or business lines that you don’t really want any more. That way you can focus on your core business, a new product line, and what you are most passionate about. Perhaps while ridding your company of debt and overhead, and bringing in additional capital to go all in on your new focus.
Or you may sell the company, and most of its assets and IP, while keeping one thing that you want to spin off into a new startup business.
Setting Up What’s Next
You may agree to have your company acquired to grow your resume, reputation and capital for a completely new project. Having a notable exit under your belt can help attract more investment on better terms, better partners and staff or cofounders, and can give you the finances to begin bootstrapping your self-funded venture with less external pressure.
How To Grow Your Company During An Acquisition
Between the time you receive an acceptable LOI from a good buyer and getting to a closing you will need to keep your company growing. Perhaps faster than ever before. You certainly can’t afford to allow it to slide. No matter how much extra time, energy and budget the transaction takes up. Failing to keep up traction will at least cost you terms and valuation in renegotiations, if not the entire deal.
Growth & Your Earnout
Even after the closing, you may need to continue to grow the business in order for your new shares to be vested, and to receive your earnout.
The terms of the transaction will greatly empower or inhibit your ability to perform here. In order to keep growing you will need the right team, a strong team, a sufficient budget, additional resources, and enough decision making authority.
Budget & Team
Before the closing you will need the available budget and team to keep growing through the transaction. Extracting capital may be a part of your reason for selling, but don’t underestimate the costs of getting to the closing. Not only will this include required paperwork and approvals, but lawyers, M&A advisors or investment bankers, accountants and more. That’s just on the transaction side. Then you need the team and budget to push growth at the same time.
Marketing & PR
Marketing and PR will be a very pivotal part of growing during this phase of the journey. You may be trimming and reallocating funds in various parts of your operations. Just don’t self-sabotage everything by pulling back on your marketing and resources for your marketing department. If anything you should be ramping up in this area.
Achieving anything in your company, especially growth, is about focus. Be sure everyone has clarity on the priorities and are focused on the right metrics and outcomes.
Use Your Process To Map Your Way To Success
During the acquisition process you will be working on your accounting and contracts and financial models and forecasts. This is all vital data and a prime moment to review everything and make adjustments. Use this to improve your ability to grow, turn a better profit, and enhance your business both for yourself, and in the eyes of potential buyers.
How To Grow By Being Acquired
Sometimes the best chance to grow and expand your business and impact may be by putting it into someone else’ hands. Or at least merging it with a larger company.
They may be more experienced, connected, funded, systemized and respected. This can all help catapult your growth. Sometimes this can produce massive overnight growth. Often far beyond your goals and expectations.
Be Sure The Paperwork Enables Growth
The fine print of the deal will both tell you a lot about your acquirer’s real intentions and how well your venture will be equipped to grow post-acquisition. Do the details indicate they just want to fold you as competition, strip everything, or are serious about propelling the success of your venture and product?
Choosing The Right Buyer
Using being acquired as a way to grow is going to rely substantially on the buyer. Some buyers won’t be interested in innovation and pushing the boundaries. They will fear change. Others will enable instant growth. Then there are those that will truly want to give you every resource they can to accelerate your growth and succeed. At least providing they are getting what they want too. Be sure you do your homework and pick the right buyer.
How To Grow Your Company By Acquiring Other Companies
Acquisitions can be very efficient and powerful strategies to grow your own company.
Acquiring other companies may take capital. It can be a very efficient and high return way to invest cash on hand. Especially if acquiring strong, high growth companies. Or those that once plugged in will accelerate your growth. These moments are also great justification for raising new rounds of funding and financing, and using leverage to grow quickly. Especially if you are acquiring tangible assets, revenue and profit.
Ability To Fend Off Competitors
If one of your chief hurdles to growth is competition you can acquire them, or pick up more companies to become bigger and stronger and enjoy more strength to fend them off or deter them from attacking you.
In some cases you may even use leverage to acquire competitors that are bigger than you are and merge multiple companies together. Just watch out for regulators and monopolies.
One reason for making acquisitions is to grow by acquiring market share. You may gobble up more local market share, acquire similar companies in other geographic regions instead of competing from scratch, or acquire customers in new niches.
Making acquisitions can be a great way to add value to your existing business, and to make it more appealing and valuable, as well as compelling for other buyers. Consolidating these ventures together can make it essential someone buys you, and at a premium. Or you may take your new conglomerate public and access more liquidity, as well as the other benefits that come with it.
Keep in mind that in fundraising or selling your startup, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
Once you reach a certain stage it is almost inevitable that your own growth rate will peak, and will decline without taking new measures. This is why many large corporations make acquisitions themselves. They have to satisfy the markets and their investors and boards that they are growing. Consider acquiring other companies that have the growth rates you need, or which you can help grow fast with your investment and infrastructure.
Economies Of Scale
Sometimes being bigger alone will unlock economies of scale that will free up cash or create more disposable cash flow which you can use to grow your company faster.
Efficiency, Technology & Pricing
Acquisitions can also be used to operate more efficiently and profitability, and to enable more and more rapid growth. It may be plugging in new parts of the supply chain, optimizing logistics, or operational efficiency and savings that come out of the deal.
Acquisitions are a powerful growth catalyst and opportunity for businesses. Both being acquired and acquiring other business can be a tool for growing your company fast, efficiently and in a big way.
Entering into an agreement to sell your business doesn’t let you off the hook for growing your own business either. In fact, founding entrepreneurs need to anticipate and prepare to grow their businesses faster than ever once they have a LOI in hand. Not only through the closing, but often well beyond that too.
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