Acquisitions are incredibly complex. Much more difficult than doing a financing round with the typical safe note structure.
Avoiding giving too much information is critical. This point is incredibly important, but is often overlooked by many. People get too absorbed in selling their business, that they forget to question the intentions of an interested party. Believe it or not, some people will reach out to you regarding your company to simply gain a competitive advantage. They may also be looking to replicate your business model for themselves, with no actual desire to make a purchase.
If you have a particular industry secret, don’t disclose this to a potential buyer. Remember, you can always inform them of useful information later down the line, perhaps in the form of advice after the acquisition is completed. You should still keep them updated on relevant business figures, as well as a brief overview of your model. However, don’t give them too much information, to the point where they feel knowledgeable enough to do everything on their own.
Sensitive information can be negotiated out of data you will share. Or it can come in after a LOI and initial legal and non-disclosure agreements are drawn up.
Evaluating The Offers You Receive
Now that you have communicated with potential acquirers, it’s time to weigh up your options. Create a list of each and use the following points as guidance:
- Understanding – Does the buyer fully grasp your business? Did they ask relevant questions when unsure? Them having a greater understanding of your business will help the acquisition and the company itself moving forward.
- Values – Making sure that the new acquirer shares your ethics is also something to consider. You could check their track record before progressing in the acquisition progress. This will give greater relief to any employees and investors that are currently involved in your company.
- Transferability – Having the acquisition be a smooth one is important. With the right skillset, the buyer can achieve a seamless takeover. Again, this will give confidence to the people invested in your business.
- Knows The Risks – Acquiring a business is a risk. It’s thought that over 70% of acquisitions fall flat, for a plethora of reasons. It’s important that the potential buyer knows this and understands the associated risks. If this is not the case, they could come running back to you if the venture is unsuccessful. In addition, it may damage relationships you have with other respectable contacts.
Remember that you should treat each potential acquirer as a candidate. You’re the one with the valuable asset and are ultimately in the best position. If there is not an offer that stands out to you, don’t be afraid to keep searching for interested parties.
Other Things To Consider
Of course, there are other areas to consider when finding an acquirer for your business. These include.
Lawyers
It will come as no surprise to you that lawyers can charge an incredibly high rate for their services. With this knowledge, you should only look to involve them when absolutely necessary. This can be right before you choose to accept an offer. By following this advice, the fees you pay can be decreased greatly, giving you a better overall ROI for the acquisition.
You should also know that a lawyer will be involved in the paperwork for you to sell your business. They will need to create a draft, establish a fair price point and also advise you on further legal documentation and risks, if applicable.
Using Professional M&A Services
Struggling to find the perfect buyer for your startup? You can use an agent to reach out and create a list of interested individuals or companies. This service isn’t alway cheap however. Evaluate your options and the value you get.
Time Scale
When the idea of acquisition enters your mind, it might seem like a time sensitive operation. This is true in some aspects. Obviously, you want to sell your business when it has a hefty valuation, but rushing during this period will often mean you sell short. Instead, ensure that enough work is done within the company to maintain operations. If you can keep your business running at maximum potential while searching for an acquirer, you will gain more time in which to pinpoint the perfect buyer.
Keeping your business at peak performance while also trying to sell can be a tough feat. A useful strategy to implement during this period would be to dedicate a certain amount of time to potential acquirers each week. This can be 1 hour a day, or a few hours over the weekend. By putting in the extra work intermittently, it will feel like less of a strain and hopefully will result in you not burning out. As a larger company you will dedicate a whole team to this effort.
Keeping People In The Loop
This is another task that can sometimes fly under the radar when selling your business. The right approach can vary depending on the size of your business and legal agreements. Timing this will prove to be pivotal in the outcome.
Making Contact With Potential Startup Acquirers
We hope this post has helped you to find the perfect way to get in touch with potential acquirers. Keep in mind that a phone call or physical meeting is likely your best bet when it comes to the communication phase. Don’t come across as desperate and stand your ground, there is more than likely the perfect acquirer out there.
Also, try to do as much of the hard work as you can regarding the search for a buyer. While this can seem overwhelming, especially when also maintaining regular business operations, it can certainly be worthwhile in the long run. M&A advisors can prove invaluable when navigating your way through this process. Though it is also smart to begin learning as much as you can about the process and strategy as early as possible.
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