Entrepreneurship

How do you get acquired?

sofia tabassum Attended Sarhad University of Science and Information Technology (NTI)

September 20th, 2016

Wondering what it takes to become attractive to larger players and what is the process to receiving an acquisition offer. Thanks a lot for your help.
As a founder, you’re always in fundraising mode (whether active or passive). In this course, we’ll teach you how to successfully raise follow-on capital, establish a valuation for your company, build an investor pipeline for your next round, and more.

Michael Leeds CEO & Founder

September 20th, 2016

#1 - Stop thinking about a sale.

#2 - Build a business that's growing quickly. This will give you the most options.

#3 - For a large, Fortune 100 company for example, you will either need to be doing an annual run rate of $50-$100 million and growing at least 50% per year or have lower revenues and millions of users (users that are paying attention to what you're doing and spending time with your app/product/service) will be valued by some companies even if you are not at the $50-$100M revenue level. Instagram, for example, was a strategic acquisition for Facebook.

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

September 20th, 2016

If you want to be bought out, in most cases you need to hire someone to find you a buyer. Some buyers are competitors who want to absorb your market share; some have complimentary products who want to add your product to their distribution channels or obtain yours; some are investors who believe that they can grow your company better than you can.  This list is not all inclusive.  

Rob G

September 20th, 2016

the terms are almost always better when they come to you VS the other way around.  Get your company noticed in the industry.  Make a dent in your market, win deals over established players, get press, grow your customer base, make a profit, speak at industry events, establish yourself as an expert in your markets, etc...  essentially all the things you would do to grow your company.  You don't want to be in a position where you need to be acquired.  Sometimes it's as simple as winning an important contract with a key customer that some larger company wants to penetrate. Important IP (patents) also helps. Being a viable competitor is the best way to get noticed.  If you have a specific acquirer in mind you can build features that compliment their products or even APIs (if your's is a software product).  Partner with a key industry player so they get to know you and your team better. Helping them win deals will get you noticed.   At that point where you have these relationships you can drop hints to spur action like hinting that you are in partnership talks with their biggest competitor.  If all else fails, hire a broker. 

Rob Adams Advisory Board Member at PhotoPad For Business

September 20th, 2016

To be attractive to an acquirer, you have to fit into one of their strategic needs. Since acquirers rarely post their strategic needs publicly, you'll often have to guess at what these might be fore your targets.   

The best thing to do is look for large, acquisitive buyers who are engaging in active PR in your space, who have made ancillary or adjacent acquisitions to your, and then play the chess game you are able to with your strategy.  Numbers, intellectual property, key customers, top talent, growing revenue, are all important to acquirers but not necessarily in that order.  

I gave a presentation about the buyer's perspective on M&A back in June to the Seattle Alliance of Angels. You can find it here : https://startup-arts.com/acquisition-buyers-pov/.    Knowing the buyer's perspective can help you figure out where you fit in. 

I am not a fan of brokers and believe using a broker is akin to shopping your company.   I wrote about that topic here : https://startup-arts.com/acquisition-request/

Ken Anderson Director, Entrepreneurial and Small Business Development, Delaware Economic Development Office

September 20th, 2016

Get traction in your chosen marketplace, acquire customers and generate revenues... be profitable. Spend some money on a seasoned marketing firm....grow at 20 percent or more annually...and the investors and buyers will find you.

K. Robbins Head Moose at Moose WorldWide Digital

September 20th, 2016

What do you guys think about M&A firms?  They have hounded me for years, I am leery of the $35K price tag....  

Brett Gardner

September 20th, 2016

In my past experience we attained offers the more clients I took from the competition. If they don't see you as a threat or don't see your company as a strategic move for growth then why would they offer a dime? When they see their numbers dropping they will notice you.

Martin Omansky Independent Venture Capital & Private Equity Professional

September 20th, 2016

Public companies usually never acquire private firms that have less than $25 MM in revenues - except when important IP is involved. Profit picture helps, but is not governing; market share, same thing. Rapid growth a plus. Sent from my iPhone

Ian Shearer Executive Chairman at Parakeetplay

September 20th, 2016

Just to respond to the query on M&A firms. I dont know any serious firms who would do a full transaction for $35k. A good M&A firm does a lot more than just find a buyer. Expect to pay a fee in the hundreds of thousands and remember you usually get what you pay for. Also a good M&A adviser (like myself) really dislikes being seen as "a broker". A broker is not an M&A adviser.

K. Robbins Head Moose at Moose WorldWide Digital

September 20th, 2016

Thanks Ian, I am being pursued by "Generational Equity" - quite aggressively I might add - and it doesn't really feel right.