When you get to that point of an acquisition when there is an offer or a potential offer on the table, what are the things to expect when your company is getting acquired?
Sometimes an offer will catch you by surprise, and come much earlier than you expected. Often it was what you’ve been hoping would happen since you really began putting your original team together.
An exit is an exit, and that’s an achievement to be proud of. It doesn’t matter whether it is for $150 million or $1.5 billion. Either way, supersized or modest, planned or by surprise offer, the big question is what is it really like getting acquired and what should be expected?
Most entrepreneurs have been so wrapped up in getting the business running, fundraising and scaling, they haven’t taken the time out to really talk to others about the experience. Here’s some of what you can expect.
1) It’s Emotional
One of the things I always come across when interviewing some of the most successful entrepreneurs on the DealMakers podcast is that entrepreneurs should expect the process of getting acquired to be very intense. It’s like your baby moving away to college, winning the lottery, getting divorced, and being under investigation by the FBI, all at the same time.
Get ready to hold on, have the most exciting few months of your life so far, wonder why on earth you got on this ride, be glad it’s all over and then really miss it once it’s all done.
2) Hell in Due Diligence
Be prepared to have your office, files and life ripped apart for at least several weeks, if not months as your acquirer and their teams and lawyers get to work on due diligence.
When getting acquired, be ready for everything to be questioned, every dot to be scrutinized, and all of your accounting and agreements to be evaluated line by line. Not just by one person, but by large teams. Not just those you met and liked and negotiated the deal with, but a lot of others who don’t know you and are just focused on the facts.
The more you can do to organize all of your documents and make sure they are clean in advance the less painful it will be. Have a due diligence room via Dropbox or Google Drive to have things structured and to streamline the process.
Most of this process will be geared towards backing the claims that you made during the pitching process. In this regard, when getting acquired 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.
Expect renegotiations throughout the due diligence process. Some buyers will go in looking for as many reasons as they can to justify lowering the price and changing the original terms of their LOI.
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