This is the recap of the Acquire Buyer Office Hour on May 20, 2022. Acquire Office Hours is our way of making time to help individuals answer specific situational questions about Acquire’ing a startup.
Our goal from the beginning has always been to democratize startup acquisitions and offer Acquire as more than just a platform but a resource to educate the community at large.
- Panelist: Paul Kelley, VP of M&A
- Panelist: Andrew Gazdecki, Founder and CEO
- Panelist: James Graves, General Counsel
Attendee’s came from 8 different countries world-wide with more than 70% of the appetite coming from the United States.
- Letter of Intent (LOI)
- Asset Transfer
- Due Diligence
- Tips and Advice
Total of 20 questions asked during the session.
- While I am an entrepreneur with money, I lack technical expertise. How should a non-technical buyer approach acquisitions that require specific technical skills to maintain and grow?
- Can you please walkthrough how an Acquirer could use Pipe to finance an acquisition on Acquire? How much would an Acquirer need to put in, v.s. being able to borrow with Pipe. An example using easy to understand numbers would be very useful, e.g. assume an ARR of 100k, and the seller is asking for a multiple of 3x, e.g. 300k all up. How much could be financed via Pipe? And what is the sellers involvement? Do they need to organize the financing with Pipe on the Acquirers behalf, or do they not need to be involved?
- When looking at small companies (pre-revenue up to a few thousand dollars MRR) how do you evaluate the opportunity offered?
- Specifically for SaaS Companies, how is Code transferred and how can purchasers ensure they a) get the code b) the code is not replicated or retained by the vendor. The purchaser may have limited knowledge about that function of the business. Escrow? Third Party vetting?
- My question is about valuation of potential acquisition when they have debt. The company I am looking at has numerous debt obligations. So if a company wants $1M to sell, and they have $800k of debt… does that mean the actually ‘all in’ price is $1.8M? Or does the $1M purchase price mean the debt is gone? I know everything is a negotiation, but looking for general accepted principles / rules of thumb. I have zero interest in this deal for $1.8m but a debt free entity at $1m could be of interest.
- If a seller hasn’t responded to my inquiry, how persistent should I be in chasing the seller? Is it very common for sellers to post their SaaS and not watch for interested buyers.
- I’m looking for an established company with $1M+ TTM, or one I can scale within Year 1 to that level. I haven’t found anything through the portal yet, but admittedly also haven’t spent much time in it. With that background, tips and tricks for searching?
- What service do you use to manage your Shopify business? (Directed at Andrew)
- How have you seen trends change over the last couple of months with market/VC turmoil?
- What is the largest acquisition price pipe could finance- is there a limit?
- Is Acquire friendly to brokers bringing PE buyout offers to Founders?
- Any recommended resources for tackling Total Addressable Market when looking to purchase?
- I own a 100 person ecommerce company and am interested in acquisitions for function or talent enhancement to my company, particularly in marketing and programming. Not a financial Acquirer, more strategic. Any advice for buying companies to 1) accelerate our functions, particularly marketing or programming, and 2) for talent (not product).
What’s the size of the biggest deal completed on Acquire?
- What should I consider if I’m buying from Canada and the business I’m interested in is in the US?
- As a seller, I’ve been offered to be paid via a seller’s credit note . What’s your input on this? Any risk of default?
- I am a prospective buyer based in India. I understand Pipe might not be available here, what are my options to avail financing? Thank you in advance!
- Are there more buyers or sellers on Acquire? Is there a balance?
- Have you come up with some standardized metrics for valuations of micro entity? Such as Rule of 40 or so for SaaS companies?
- Question on the LOI tool – what happens if a sender/recipient needs to make changes to the document? I’d be happy to take this one offline – it might be more of a conversation than a question.
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