5 Things You Must Do Now to Make Your Acquisition Go Smoothly

You might want to sell, but are you ready to sell?

When you list your company on the market, you’ll spend all of your time fielding inquiries and managing the sale.?

You won’t have much time for dwelling on your goals – and might have to make quick decisions to keep buyers hooked.?

And remember: You still have to hit your numbers. Let them slip, and those buyers will tear chunks out of your asking price, leaving you with less in your pocket.

Getting Acquired is an emotional roller coaster. If you don’t set your expectations now, you risk getting caught in the tailwind, arriving somewhere you don’t want to be.?

But it doesn’t have to be that way.?

Prepare for your acquisition now, not after listing, and you’ll not only recognize a good offer when you see one but also know when to negotiate or walk away.?

1. Decide What You’ll Do After Acquisition

Imagine the emotional fallout from going from 80-hour weeks to zero-hour weeks.

You’ve probably spent years thinking about your startup and little else. Then – bang! – you’re no longer a boss and are working for whoever Acquired your company, or you’ve left the business and gained all this free time. What will you do with it??

What you do after acquisition isn’t important so long as it’s something you want and the acquisition will help you get it. Many founders start new ventures, but you might instead go on vacation, start a new hobby, retrain, or just spend time with friends and family.?

But decide before starting the acquisition process because you never know what life might throw at you. In the best case, you decide when to sell, but in some cases, you might need to sell quickly due to a bereavement, divorce, or some other unforeseen event.

When you know what you want to do after acquisition, you can prepare for it – whether you’re staying on for a year or so to help with the transition and hitting new milestones or walking away.?

2. Get a Deal Range in Mind

Of the following founder types, which do you most identify with?

• You just want to get Acquired to join the “club” or add it to your resume.
• You want to get Acquired to raise funding for a new venture.?
• You want to get Acquired to retire early or achieve financial independence.?

You might want a mix of all three, but you probably value one over the others, and that will determine an acceptable range of asking prices. It also directly impacts the performance milestones you need to hit.?

Let’s take a look at an example. Say you want to retire early. First, you need to know how much you need to retire early. What’s the big number? A wealth planner or financial advisor can help you answer this question. They’ll look at your lifestyle, location, and other factors to estimate what you need to live the life you want for the rest of your years.?

Now you have to work back from that number. How big does your startup need to be to get close to that target figure? What’s a safe margin that’ll bring you close to that ideal retirement plan?

Also, consider how much equity you own. It won’t always be your payday exclusively but also that of your cofounders, investors, employees, and so on. Others’ equity and terms all play into the final exit number, and all point to the multiple you need to be within closing distance of your goal.

The market decides how much you can sell for so the next step is finding out what range the market will support. What’s the appetite for businesses like yours? What do other companies get Acquired for in your sector??

If the market isn’t likely to support your target range, study the value drivers for your industry and see if you can work on them to get to a safe exit range. You’ll then be in a better place to achieve your goals, delight your investors, and make everyone involved happy.?

It might mean deferring your acquisition for a while, but does that matter? If it gets you what you want, the investment in time and effort could be worth it.?

3. Create the Conditions for Objectivity

If you get an acquisition offer that’s good, but not great, should you accept it?

Only you can answer that question, but here’s some advice that might help you.?

First, accept you’ll feel a little FOMO (fear of missing out). You might get a surprisingly high offer that artificially raises your bar, only to find out after due diligence that the investor never intended to follow through.?

Chasing numbers is a fast way to derail your acquisition so establish goals in advance to know a good deal when you see one.?

Second, remember it’s not all about the price, but also the terms. Think of the deal components you’ll accept to close any gap between your and the buyer’s expectations on price and risk. Doing so will help you decide when to push harder or walk away.?

If things go well during the selling process, you’ll attract many potential Acquirers . You’re then in a better position to negotiate and leverage one against another. But remember: This is still a careful dance – conversations have to stay calm and respectful.?

You want the buyers to offer you a sweeter deal because they see the value of what you’re offering. If you push too hard, you might turn off the buyer. Establish a safe balance that maintains good relations, and retain backups if one conversation goes sour.

When fielding buyer inquiries, keep your goals in mind. If they offer you everything you want, or what you said you wanted, remember why you asked for those things in the first place. Picture the person you envision becoming after acquisition.?

Once an offer fulfills the conditions for you to realize the life you want, consider it carefully. As we’ve seen in the last few years, the world can change in the blink of an eye, and if something unforeseen happens, will you command a similar offer again?

4. Learn What’s Fair in the Market

If you’ve whittled down a hundred or so buyers to one amazing offer, you probably won’t feel much FOMO. You’ll be pretty confident the market is giving you the best offer.?

But evaluating offers is a lot harder when you’re fielding just a handful of inquiries, alone, and without market insight. Cynicism and anxiety can creep in and make it harder to negotiate from a position of strength.?

Knowing what’s fair in the market is really a function of how many conversations you can have with buyers. Since you already have your hands full just running your startup, you might want to hire an acquisition professional . They’ll market your startup, bring buyers to the table, and help you evaluate and negotiate offers.?

Decide in advance whether a full market exercise with the help of a professional is viable in your circumstances. In most cases, market insight is hugely beneficial, but needn’t be make or break: If you have a baby on the way, for example, you might just take whichever offer comes to the table that meets your goals. And that’s okay.?

5. Understand Buyer Motivations

If you’ve done a full market exercise, you’ll meet lots of different buyer types, each with their own way of discussing and negotiating a deal. These might be professional buyers, too, but don’t be surprised if some of them lowball you to see if you’ll bite.

Without understanding what motivates buyers and how the acquisition market behaves, you might grab that lowball offer. It could be a number that makes your eyes water. But you’ve yet to establish the quality of the deal structure or whether that buyer has an ulterior motive.?

What if they Acquired your technology, closed your business, and fired your employees? Learning how buyers operate and the types of buyers you might meet in advance will help you evaluate offers when they come in.?

Start talking to others in the industry who’ve been Acquired. Talk to buyers, investment bankers, and other people that work on the acquisition process or Acquire companies for a living. Many will happily give you half an hour of their time to answer your questions.?

Sometimes you’ll hear a number and think it’s too small. Before saying no, review the terms that go with it. Maybe they promise 100 percent cash, a clean break, employee retention, and product development – all these amazing terms that might change your view of the deal.?

Price alone tells you such a small part of the story that it’s easy to jump to conclusions about the buyer’s intentions. You might get irritated or angry. But share the offer with your acquisition professional for evaluation. It might be a win-win for you and everyone else involved.?

If you’ve been running a company for years, you might be itching to sell and start something new. You might also be feeling a bit burned out. When you start the acquisition process, you need your wits about you, so don’t leave exit planning until the last minute.?

If you thought this was helpful, please share and add to the conversation by writing a response.

This article was originally posted and written in collaboration with Acquire.com

***The content 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 professional(s) before making any decisions. ***

Shawn Flynn

Shawn Flynn is a Principal at a premier middle-market investment bank with a global presence. Shawn has expertise in mergers and acquisitions, capital markets, financial restructuring, and secondaries. He speaks Mandarin and is the host of the award-winning Podcast The Silicon Valley Podcast. Connect with him on LinkedIn .