Time invested throughout every stage of the process
The crazy hours and schedule needed to get the deal closed
The mental anxiety and stress level
How much scrutiny your company is under during due diligence
Juggling keeping your business on track and managing the deal
The good news is that you don't have to do it again if you don't like it. But like fundraising and working through all of the other quirks of launching a startup, some people end up loving the art of the deal so much that they want to start, scale, and sell businesses over and over again. Just prepare yourself, because it will be challenging.
The Acquisition Process
A great acquisition is a combination of art, science, and execution. The first step to pulling off an acquisition is learning the parts of the process. Figure 2.1 gives you a great 30,000 foot view of what it looks like.
These broad phases of the business acquisition process encompass a lot of details and specifics that we will explore across the entire book:
Chapter 2, Getting Your Company Acquired. To successfully close a deal, facilitate an efficient process, and end up happy with the outcome, you need to learn what potential acquirers are looking for and the pitfalls that await.
Chapter 3, The Role of Investment Bankers. Investment bankers can provide a lot of value and advice, and they're a great asset in helping you set up good cop, bad cop roles.Figure 2.1 Business Acquisitions Process
Chapter 4, How to Plan Ahead. Know why you want to sell, and understand why and how making yourself expendable is important.
Chapter 5, Preparing the Company's Pitch Book. Your pitchbook is where you clarify your uniqueness and value proposition, transition plans, marketing plan, and more. This is where you bring together a proven template for success with the art of presenting the acquisition opportunity for the optimal outcome.
Chapter 6, Putting Your Finances in Order. Everything needs to be properly organized and presented to show off the best picture. Your accounting needs to be polished, you need to have fresh and accurate research at hand, and you need to have the right metrics ready for your presentation.
Chapter 7, Understanding Your Valuation. Make sure you understand the common methods of valuation, where valuation puts your business, and what you can do to strike the best balance of valuation and terms.
Chapter 8, Building the Target List. Find out who the ideal and most likely acquirers of your business are. Filter them and make a short list of your preferences.
Chapter 9, The Communication Process with Buyers. Get to know the paths of connecting with those on your short list, how to make the choice seem obvious to them, and take the conversation through to the next phase.
Chapter 10, Preparing for a Successful First Meeting. Understand your buyer and their concerns, establish the agenda, and follow up.
Chapter 11, Getting to a Letter of Intent (LOI). Learn all the aspects and details of what should be in the LOI and what shouldn't be included.
Chapter 12, Communication with Stakeholders. There is plenty going on that can derail your deal. The last things you need are internal issues or pushback. Be sure everyone on your side is fully bought in to this move.
Chapter 13, Negotiating the Price Tag. Get ready to negotiate and renegotiate. Know where you can give, where you can't, and how to play the game well.
Chapter 14, The Due Diligence Stage. It's not a done deal until you survive the due diligence phase.
Chapter 15, The Purchase Agreement. Get familiar with purchase agreements, what all of the clauses and terms mean, and who you should deal with.
Chapter 16, Strategic versus Financial Acquisitions. Understand the different types of acquisitions, organizations, buyers, and what matters to them.
Chapter 17, Ways to Kill a Deal. By knowing the many ways the deal can go wrong, you're better situated to handle problems that arise.
Chapter 18, Legal Considerations. There is a lot more to legal considerations than just the contracts and warranties. Regulations, due diligence, working capital, escrow, stockholder approval, liens, and more all come into play.
Chapter 19, Closing the Deal. This is the fun part—actually signing the deal and putting the money in the bank.
Chapter 20, Transitioning to a New Phase. You may stay on with your new company for a while, or you may be ready to accelerate forward into the next venture after an extended, well-earned vacation. Be sure you are thinking ahead.
Chapter 21, The Emotional Roller Coaster During Acquisitions. Acquisitions can bring a whole new set and level of emotions—not just the anxiety of getting the deal done (or not), but also the feelings that come with parting with your startup baby and putting it into someone else's hands—and then figuring out how you'll handle your future plans.
Media versus Your Business: What You See in the Press versus Reality
Just as with fundraising, there can be a big difference between the average merger and acquisition and the sensational headlines you see in the media.
After interviewing hundreds of real-world entrepreneurs on the DealMakers podcast—entrepreneurs who have raised amazing money and exited their companies for the grandest outcomes—I've gained and shared the inside scoop on many big deals.
There are certainly startups that have attracted amazing inbound offers in just a year or two since launching. Some have been incredibly fortunate to have found highly competent and efficient acquirers who have run smooth and fast processes. More than a few have sold their companies for billions of dollars.
Others appear to be “overnight successes” after 10 years or more of hard work. Some end up exiting their companies in less-than-ideal circumstances and for much less than expected.
Sometimes board members sabotage the ideal moments to sell for the most dollars. Although exits can happen in only a few weeks, they can often take a year to complete—a long period of extra hustle and stress, which few people talk about.
And although most founders