Pandemic prevention measures have popped the cork on fundraising and you won’t find a better time to get Acquired. KPMG predicts global M&A to hit $6 trillion this year (2021) and is already up 20 percent from 2020. The only question is, how do you get buyers’ eyes on your startup and ensure they’re the right fit? You’ve probably never marketed a startup before, right?
You could list on Acquire and wait for the right buyer to send you a message. Many founders have done just that and each had tens of buyers reaching out to discuss acquisition. But vetting and negotiating with buyers is where things start to get tricky. For one, they have different priorities and probably know the acquisition process better than you do.
As a result, you might need a little help from an M&A advisor. They excel at marketing startups and vetting buyers because that’s what they do every day. These acquisition veterans bring the expertise, network, and market knowledge you need to secure the best outcome. They’ll also screen buyers so you don’t waste time on those who lack capital or misalign with your goals.
It Starts With an Assessment
Understanding what’s driving your decision to sell is equally as important as determining the value of your business. Are you hanging it up or using the proceeds from acquisition to reinvest in your next venture? You might not have considered these scenarios, but they will influence the marketing strategy and the inevitable structure of the transaction.
Of course, understanding what your business is worth is no easy task as there are many variables at play. We can estimate your valuation range (if you operate a SaaS business) with the launch of MicroMRR, our free SaaS valuation and analytics platform. An M&A advisor, however, considers all the elements of your business that could impact a transaction.
For example, quality of earnings, contracts, concentrations of revenue, working capital needs, industry trends, and key employees will all affect your valuation. Your M&A advisor takes stock of these critical factors when refining your valuation and justifying it to the market.
Buyers can be a cynical bunch when it comes to valuations. Having an M&A advisor part of the transaction can soften buyers’ tactics which is why preparation is critical. You want to eliminate any surprises for the buyer because surprises kill deals. It’s better to understand the issues and opportunities specific to your company and address them at the right time in the process.
Advisors thrive by their reputation in the acquisitions market, in which buyers generally earn their bread and butter but where you might only be a debutant. An M&A advisor, therefore, adds enormous value to the process itself and thereby credibility to your valuation.
Creating a Market for Your Business
Of course, your M&A advisor can’t market your startup without first learning about your business and preparing an Offering Memorandum (a prospectus that attracts potential buyers). An advisor can preemptively answer buyers’ questions in a concise package that communicates the necessary details of your business while also presenting your opportunity in the best light.
Your M&A advisor will also explain what possible deal structures you’ll encounter and prepare and deploy go-to-market strategies that get your startup in front of as many prospective buyers as possible. This is one of the biggest challenges in creating a market for your opportunity, but by listing on Acquire, the market has effectively already been made.
At the first tickle of interest, your advisor will screen potential buyers and only connect you with those that might be a good fit. Then, when it comes to negotiation, they’ll either argue on your behalf or prepare a negotiation strategy to help achieve a mutually satisfying outcome. The advisor can manage every party to your acquisition and every moving part of the process.
Closing in on a Buyer
There are typically three types of buyers: owner-operators looking to Acquire a job, strategic buyers that are looking to grow or streamline their business through acquisition, and financial buyers looking for a return on their investment. Each buyer type requires a different marketing strategy, and your M&A advisor will prepare and deploy that strategy on your behalf.
Once they have a few prospects in their sights, your advisor will approach them confidentially and only release information about your business if they’re serious. This involves screening buyers on such factors as their reputation, history, goals, and potential for completing the acquisition on time and on terms that are acceptable to you.
Final Negotiations
Once your advisor has packaged and presented your startup to its most promising prospects, you might be in a negotiation with one or several buyers. But the final purchase price isn’t the only measure of success. The deal structure itself is equally important. How much upfront cash will you receive? How much compensation will you defer? How much tax will you pay?
Then you also need to consider terms such as representations and warranties, training periods, earnouts, and whether you want to (or have to) stay on in the business for a period after it’s been acquired. Your M&A advisor will help you navigate all these variables and help you understand what’s fair, reasonable, and best achieves your acquisition goals.
An advisor also helps manage expectations and timelines in a transaction schedule. Depending on the complexity and size of your opportunity, it would not be uncommon for a transaction to include 10-20 individuals, each participating in advancing a deal from an offer to a closed deal.
Selling a business is tricky. It’s time-consuming, often confusing, and can lead to many obstacles and questions. An advisor can predict and avoid hurdles, clear up uncertainty, and calm anxieties along the way to ensure you get the best deal.
If you’d like to request an M&A advisor to help sell your startup, click the “Hire expert help” button from your seller dashboard. Our general counsel, James Graves, will match you with the right expertise. You can also contact James directly for an introduction at james@acquire.com. Good luck!
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.
