- The Key Roles in an Acquisition (Who’s Involved)
- Who Does What at Each Stage of the Acquisition Process?
- 1. Deciding to Sell Your Company
- 2. Exit Planning
- 3. Evaluating Buyers
- 4. Fielding Offers and Negotiating With Buyers
- 5. Passing Due Diligence
- 6. Signing the Asset Purchase Agreement
- 7. Going Into Escrow
- 8. Transferring Acquisition Assets
- 9. You’ve Been Acquire’d
- Who Participates in the Negotiation Process?
- Who Are the Key Stakeholders in Mergers and Acquisitions?
- Who Handles Acquisitions in a Company?
Are you having nightmares about the acquisition process?
With so many parties involved, you might not know who should be doing what and when. To make matters even more daunting, as the size and complexity of an acquisition increases, so does the number of people involved.
But don’t worry! You’re about to learn who to involve in your acquisition – from exit planning to closing – and how they can help you. While you can manage the entire acquisition process alone, bringing in experts can go a long way in securing the best price and terms.
The Key Roles in an Acquisition (Who’s Involved)
Before learning who does what in your acquisition, let’s review the most common roles. The people involved will vary depending on the size and complexity of your acquisition.
- Seller: You – the person or entity selling the business.
- Buyer: The party buying your company or assets.
- Wealth advisor: A wealth advisor helps individuals manage their wealth, including investments and financial planning, and may be involved in advising you on how to manage the proceeds from the sale of your company. They can also help you understand the price range you must hit to meet your goals.
- M&A advisor: A mergers and acquisitions advisor helps you throughout the acquisition process by identifying buyers, negotiating terms, or guiding you through due diligence.
- Attorney: An attorney provides legal guidance during the acquisition by aiding in due diligence, drafting and negotiating transaction documents, advising on regulatory compliance, and structuring the transaction to save tax.
- Accountant: An accountant provides financial and tax advice, including analyzing your financial statements and the tax implications of the transaction.
- Valuation expert: A valuation expert provides an independent and objective assessment of your company’s value, choosing the most relevant valuation methodology and carrying out the calculation.
- Tax advisor: A tax advisor will explain the tax implications of your acquisition, including potential tax savings, tax liabilities, and how to pay less tax with specific deal structures.
- Due diligence analyst: A due diligence analyst evaluates the health of one or more aspects of your business (such as your finances, for example). They then draft a due diligence report for your buyer, or for you to help prepare for your acquisition.
Who Does What at Each Stage of the Acquisition Process?
Now that you know the key players, let’s tie each of them into a stage of the acquisition process. Certain professionals and team members will pop up several times during the acquisition.
1. Deciding to Sell Your Company
Deciding to sell your company can be a difficult and emotional decision. As a founder, you’ve put your heart and soul (along with all that time, effort, and money) into building your company, and the thought of parting with it can be overwhelming.
Whether you’re selling because you’re burnt out or just want to start something new, evaluate your goals and consider the potential impact on your employees, customers, and community. Ultimately, the decision to sell your company is yours, but here are some people who can help you decide.
- You (Seller): You make the final call to sell your business. We suggest going through this questionnaire and asking questions like, How do you feel about your startup? What offer would be large enough for you to justify an exit? Do you see any large hurdles coming for your startup?
- Cofounders and majority investors: Cofounders and majority investors are highly invested in your company’s success and will want (and may legally have) a big say in your decision to sell. They need to be on board to ensure a smooth acquisition process and minimize the risk of conflict.
- Senior management: Your management team (C-suite) is likely to have a vested interest in your company’s success too, especially if they own equity. Involving them in decision-making ensures everyone is aligned on the best action. The support and cooperation of senior management can also help you lead the company through the sale process.
- Community: Selling your business affects your friends, family, and professional relationships. They’ll likely have their own opinions on whether you should sell. You might also turn to other founders who’ve sold businesses for advice and support.
- Wealth advisor: Say you want to buy a house or retire early, your wealth advisor can walk you through different acquisition scenarios and how each affects your financial goals. Understanding these outcomes can help you decide when to sell and even what prices you’d accept.
2. Exit Planning
Planning for the day you eventually sell your company can help you negotiate a better price and terms. From increasing efficiency to growing revenue, few plans to increase your asking price can be done overnight. The longer you plan your exit, the better the big day will be.
Who’s involved in exit planning?
- You (seller): What are your acquisition goals? Sell in three years? Five? How much do you want to sell for? Would you stay on after the sale? What type of buyer do you want to attract? Exit planning starts with answering questions such as these.
- Accountant: Untidy financials are a red flag to buyers, so ask your accountant to clean the company’s books and reconcile different data sources from marketing, sales, accounts, and more. Resolve discrepancies now, not when buyers ask questions.
- Senior management: To achieve your acquisition goals, your company’s operations, finances, and market position might have to improve. Lean on your C-suite staff to help build your business into an attractive investment opportunity for buyers.
- Valuation expert: After calculating your company valuation, consider hiring a valuation expert for a professional opinion. Then get a third and fourth opinion, if you can. You want to pitch your asking price to attract maximum buyer interest. We’ll also give you a free valuation once you list your startup on our platform.
- M&A advisor: If you’re not confident in managing your acquisition alone, hire an M&A advisor to do the hard work for you. Alongside giving you a market-tested valuation, they also bring buyers to the negotiating table and explain different deal structures.
- Due diligence analyst: Why do due diligence on yourself? To identify and fix any problems that might derail your acquisition before they arise. Consider hiring a due diligence analyst to give you an objective assessment.
3. Evaluating Buyers
After listing your company on Acquire.com and generating interest, you’ll evaluate potential buyers to determine the best fit for your business. While the evaluation process usually involves gathering information about the interested buyers, such as their financial standing, strategic goals, and track record of previous acquisitions, we’ve already done all of that for you.
Every buyer on our platform is fully vetted, having gone through identity, funds, and goals verification, so you can focus on the deal.
Who’s involved in evaluating buyers?
- You (Seller): Is the buyer a good culture fit? Do their goals align with yours? Do they have the resources and experience to achieve their vision for your company? Ask these questions before accepting a buyer’s offer.
- Cofounders and majority investors: Cofounders and investors want the same as you: maximum value (payout) at exit with as few conditions as possible. Their input can help ensure potential buyers are aligned with your startup’s values, mission, and goals.
- M&A advisor: An M&A advisor analyzes the strategic fit between your business and the buyer’s business, including their product lines, target markets, and geographic footprint. This can help you determine if the buyer’s a good match and whether the acquisition would produce good results. An advisor can also research the reputation of potential buyers, looking at their track record in completing acquisitions, their history of litigation, and their relationships with key stakeholders.
4. Fielding Offers and Negotiating With Buyers
Once the letters of intent (LOIs) start rolling in, you need to review, negotiate, and accept one of them to keep your acquisition moving. With the right negotiation strategy and expert guidance, you’ll accomplish your acquisition goals.
Here’s who you may want to involve at this stage:
- You (seller): Once you’re happy with an LOI, you can sign and accept it digitally. We recommend asking your attorney to review the offer if you’re unsure of anything.
- Attorney: Your attorney advises you on legal exposure and the terms of the LOI. They can also help with the negotiation strategy, decode offers, and ensure the deal is favorable for you. If you decide to review an LOI with just one person, make it your attorney.
- Certified public accountant (CPA): A CPA can give you guidance on the tax implications of the offer and how you can structure the acquisition to minimize tax.
- Wealth advisor: Working closely with your CPA, your wealth advisor can help you determine how the LOI will impact your overall financial plan and life goals.
- M&A advisor: At this stage, an M&A advisor can help you negotiate the terms of the sale, including the purchase price, payment structure, and any closing conditions.
5. Passing Due Diligence
Once you’ve accepted a buyer’s offer, your acquisition won’t close until you’ve passed due diligence. Think of it like the buyer popping the hood on your startup and checking the engine for hidden problems. They’ll investigate everything from your finances to your teams and cap table. The buyer doesn’t want to miss any issues that might lead to a future loss, so the more cooperative you are here, the more confident your buyer will be.
Set up a data room to safely share all the confidential information the buyer requests. Passing due diligence can be time-consuming, so you might want to outsource some of the work to professionals like due diligence analysts or an M&A advisor.
Financial Due Diligence
Financial due diligence is where the buyer validates your company’s financials. They’ll verify the authenticity of your numbers and check for any red flags that suggest your business’s financial performance is not what it seems.
Who’s involved during financial due diligence?
- You (seller): If you don’t have a CFO or accountant, you’ll be the one to gather all the financial evidence requested by the buyer during due diligence.
- Accountant: Your accountant can get your company’s financial records in order and help respond to the buyer’s questions by providing the right evidence.
- Chief Financial Officer (CFO): With their financial expertise, you can involve your CFO in due diligence to help share the right financial records with the buyer and provide additional context.
Legal Due Diligence
Legal due diligence is a deep dive into your legal standing, covering contracts, agreements, permits, and licenses.
Who’s involved in legal due diligence?
- Attorney: Your attorney can help to provide evidence for legal due diligence by checking legal documents, ensuring the acquisition is legal, and ironing out any legal issues on your side. Ask your attorney for your digital minute book (a compilation of all legal business records), as a big part of buyer requests will involve documents that your attorney has on file in your digital minute book.
- Tax Attorney: If your regular attorney isn’t specialized in taxes, a tax attorney can help you navigate the tax implications of the transaction and try to minimize taxes due.
Technical Due Diligence
If you’re selling a software company, or rely heavily on technology, the buyer will conduct technical due diligence on your startup. They’ll review the quality of your code and the scalability of your infrastructure to ensure that it can handle the expected volume of users and traffic.
Who’s involved in technical due diligence?
- You (seller): If you’re a technical founder who’s helped build the product, then you’ll be share technical evidence with the buyer.
- Chief technical officer (CTO): If you’re a non-technical founder, you can rely on your CTO’s extensive technical knowledge. They can answer the buyer’s technical questions and provide the right evidence.
- Internal technical team: If you don’t have a CTO but do have developers on your team, they can help provide technical evidence for due diligence.
- Third-party consultant: If your code is contracted out, you can hire a third-party consultant experienced in technical due diligence. They’ll conduct an independent assessment of your technical infrastructure, systems, and processes and report back to the buyer.
Intellectual Property Due Diligence
Intellectual property (IP) due diligence evaluates intangible assets that your company owns or uses. If you own intellectual property, the buyer wants to understand what that IP is, who built it, and what architecture and software languages it uses. This is all to avoid any ownership disputes in the future.
Who’s involved during IP due diligence?
- Chief technical officer (CTO): Your CTO can provide a complete inventory of your company’s intellectual property, including patents, trademarks, copyrights, and trade secrets. This ensures the buyer knows what intellectual property they’re acquiring.
- Intellectual property attorney: You (or the buyer) can enlist the services of an IP attorney or IP due diligence specialist. They can help identify and assess the strength of your company’s IP assets, review the status of any pending IP applications, and provide guidance on infringement risks or legal disputes.
Operational Due Diligence
Operational due diligence puts your company’s operations under the microscope. The buyer will examine your management team, processes, and systems to find any weak spots or inefficiencies that could cause problems after the acquisition.
Who’s involved in operational due diligence?
- You (seller): You’ll be the one to gather all the operational evidence needed for due diligence. If any aspect of your operations is inefficient, share your plan to address the issue with the buyer. Reassure them that you’re not trying to hide anything and are committed to solving any problems.
- Chief operating officer (COO): Your COO can join meetings with the buyer’s due diligence team to provide additional insight into your company’s operations and address any inefficiencies discovered during due diligence.
6. Signing the Asset Purchase Agreement
As soon as you’ve passed due diligence, you and the buyer will sign the asset purchase agreement (APA) describing the purchase price, terms, and assets to transfer. While you signed off on (mostly) non-binding terms in the LOI, an APA requires you to uphold your end of the deal.
Who’s involved in signing the APA?
- You (seller): Once you and the buyer are happy, you each sign the APA and any other necessary documents to finalize the price and terms of your acquisition.
- Attorney: The buyer traditionally prepares the first draft of the asset purchase agreement and sends it to you. After you review it with your legal counsel, you can either accept the terms or counter them with revisions.
7. Going Into Escrow
Always use an escrow service to close your acquisition. Rather than trust someone you barely know, our escrow partner, Escrow.com manages the transaction, ensuring that you and the buyer fulfill the obligations under the asset purchase agreement, protecting you from fraud.
Who’s involved in escrow?
- You (seller): You must agree to escrow service terms in your APA and on the Acquire.com platform to start your escrow transaction.
- The buyer: The buyer must also agree to escrow terms in the APA and on the Acquire.com platform to start the escrow transaction.
- Escrow service: Escrow.com will verify and hold the buyer’s funds while you transfer the acquisition assets. The buyer has an inspection period to review the assets you sent them, and once they approve those assets, Escrow.com will release the buyer’s funds to you.
- Escrow agent: You don’t need to use Escrow.com if you don’t want to or can’t for your specific deal. Escrow.com is effective for simple to moderately complex transactions but can’t handle every possible deal. If you don’t use Escrow.com, refer to an escrow agent or attorney to act on your behalf – just ensure you and the buyer have agreed to escrow terms in your APA.
8. Transferring Acquisition Assets
Transferring acquisition assets is the final stage of the acquisition process – you’re almost there! This involves you transferring ownership of the acquired assets to the buyer, which can include intellectual property, inventory, and equipment.
Who’s involved in transferring assets?
- You (seller): Create an asset transfer plan that identifies all the acquisition assets, ensuring everything is properly documented and accounted for.
- Attorney: Consult your attorney for the asset transfer plan, so you don’t miss anything in the closing stages.
- Accountant: You might also include your accountant to ensure that all the necessary documentation is in order.
- Chief technical officer (CTO): If you’re a non-technical founder, your CTO will be involved at this stage to transfer your codebase to the buyer.
9. You’ve Been Acquire’d
Congratulations, you did it! You have successfully sold your business and it’s time to celebrate. Who’s involved at this stage of the acquisition process? That’s easy: Friends, family, your team, and anyone who can hear you screaming from the rooftops that you’ve been Acquire’d!
But remember that not all deals end once you’ve transferred the acquisition assets and received your funds. While the sale has closed, you’ll still be involved in the post-acquisition process. Even if you aren’t officially staying on at your company, you’ll have a relationship with your buyer for one, two, or even three years after the acquisition.
The specifics depend on what you’ve negotiated with the buyer, but you’re at least on the hook for representations and warranties. In the future, something might unexpectedly come out of the woodwork and the buyer will call on you to help fix the issue – because, after all, you both have your company’s best interests at heart.
We hope this guide helps you feel confident and empowered as a seller, allowing you to navigate the acquisition process easily. Now, it’s time to sell your startup on Acquire.com.
Who Participates in the Negotiation Process?
The negotiation process during an acquisition typically involves several parties, including:
- Buyer/acquiring company: This is the company or individual looking to acquire your company. They are responsible for initiating the acquisition process and making you an offer.
- Seller/target company: This is your company. You can accept or reject the buyer’s offer and may negotiate the terms of the acquisition.
- Attorneys/lawyers: Lawyers are often involved in the negotiation process to ensure that the terms of the acquisition are legally sound and protect the interests of both parties.
- Board of directors/investors: Your board of directors or investors have to approve any acquisition offers. They may also negotiate with the acquiring company to ensure that the terms of the acquisition are beneficial to the shareholders.
- Shareholders: Your company’s shareholders have a vested interest in the acquisition and may have a say in whether or not your company should be acquired. They may also be involved in negotiating the terms of the acquisition.
Who Are the Key Stakeholders in Mergers and Acquisitions?
Mergers and acquisitions (M&A) involve multiple stakeholders, including:
- Shareholders: Shareholders of both companies are interested in the financial benefits the transaction will bring, such as increased revenue and profits, and are affected by any changes in the value of their shares.
- Management teams: The management teams of both companies are responsible for leading and managing the organizations. They can be affected by changes in their roles and responsibilities as a result of the acquisition.
- Employees: Employees can be affected by changes in their job security, roles and responsibilities, and overall company culture.
- Customers: Customers can also be impacted by an acquisition, particularly if there are changes to the products, services, or pricing.
- Suppliers: Suppliers to both companies can be affected by an acquisition, as changes in supply chain relationships can impact their business operations.
- Communities: The communities where the companies operate can also be affected by an acquisition, particularly if it results in job losses or changes to the local economy.
The acquiring company needs to consider the interests of all stakeholders to ensure a successful acquisition and minimize any negative impacts on those involved.
Who Handles Acquisitions in a Company?
The acquisition process in a company is typically handled by a team of individuals from various departments who work together to evaluate, negotiate, and complete the transaction. Depending on the size of the company, here are some common positions involved in an acquisition:
- Chief executive officer (CEO): The CEO is responsible for setting the company’s strategic direction and may be involved in initiating the acquisition process.
- Chief financial officer (CFO): The CFO provides financial analysis and advice, identifying potential funding sources and managing financial risks associated with the transaction.
- Chief operating officer (COO): The COO may be involved in the acquisition process, particularly in assessing how the transaction will impact the company’s operations and identifying how both companies can benefit from each other.
- Business development manager: The business development manager is responsible for identifying potential acquisition targets and conducting due diligence to evaluate the target company.
- Legal counsel: Lawyers are involved in the acquisition process to provide legal advice, draft and review contracts, assess regulatory requirements, and ensure compliance with applicable laws.
- Investment bankers: Investment bankers may be involved in the acquisition process to find buyers, help structure the deal, and identify potential financing sources.
- Project managers: Project managers oversee the acquisition process, ensuring that all tasks are completed on time and within budget and coordinating communication between all parties involved.
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