Just like the seven ages of man, all businesses go through an evolution; from a start-up existing hand-to-mouth, through to a company that has become the one to beat.
Chances are that when you’ve got to the latter stage, the time has come to either IPO or put a for-sale sign in your front garden.
There isn’t a set rule book for how you approach growing your business for acquisition – each and every company is different. But having been a CEO of a company that was sold, here are some things I wish that people had told me at the time.
How do you get attention?
You’ve decided that the time is ripe for acquisition. Now the question is, who’s going to buy you? There tend to be two main routes to acquisition; either a VC will buy you or a competitor.
Both have their own particular nuances. The former will likely come in and fund you for rapid growth, enabling you to bring in the skills and expertise needed to then get noticed.
If, however, you want a competitor to come knocking on your door, you need to get their attention. And to do that you’ve got to consistently beat them at winning deals.
That means understanding your strengths and playing to them. Whatever your secret sauce is, use it. Not just once, but time and time again to become a thorn in the competition’s side.
If you’re winning deals that they think they should be, then sooner or later they’ll start to question what is you’ve got that they haven’t.
More often than not, they realise that the quickest route to emulating your success is to bring you on board.
Understand your competitor’s acquisition strategy
Knowledge, as they say, is power. In a competitive market, it can do no harm to understand competitors’ acquisition strategies and processes.
How do they identify potential targets? Have they successfully integrated other firms into their company? Do you have connections in common that could make introductions?
If you don’t want it to be known that you’re interested in being acquired, there are numerous intermediaries whose remit it is to make enquiries without revealing your identity.
In addition, such an agency can greatly help you to understand your potential value as they provide relevant context to inform your asking price.
It could be that when a competitor comes a-knocking, it’s not the right time for your business but keep in touch and keep it pleasant.
When I sold a previous business, we kept conversations ongoing and they asked us to notify them if another offer was put on the table.
When it was, we gave them a call and because we’d kept in contact, we’d been able to build real affinity, which meant we trusted each other. The rest is history.
Get your processes in order
One of the nice things about being a small company is that they are often process light. Regardless, if you want to get acquired, you need to get process-savvy, from how recruitment and appraisals are handled through to expenses and share value, with the latter being of particular importance.
The acquiring company will want to see that shareholder schemes have been consistent and prices agreed. If there is any discrepancy in the shareholder valuation process, then later down the line it could be that shares are repriced, resulting in a tax liability for shareholders.
Don’t underestimate the due diligence process and ensure your CFO is made of the right stuff. They are critical to sealing the deal.
Be emotionally prepared
Being acquired is an emotional rollercoaster that no one can really prepare you for. One day you’re responsible for everything, the next day nothing.
It is an exceptionally odd feeling and you are left feeling protective towards your employees, keen to ensure that the acquiring company is as good as its word.
When you are in discussions, be sure that you understand their intentions and ask yourself if you believe them.
When a team of people has worked together through good times and bad to create a company, you have, in my opinion, a social and moral responsibility to ensure that your employees won’t be left high and dry.
Think carefully about how you integrate your team with a company that they’ve viewed as fierce rivals for however long. It is imperative to overcome this for the two companies to integrate effectively and move forward as one team.
If you’ve been honest about your intentions for the company and created a scheme whereby all employees benefit – not just the board – the news of an acquisition will not shock as much as it might have otherwise.
Just like children, businesses do not come with instruction manuals and all acquisitions are different. If I had to pick one lesson, the most important one to me personally was being able to look myself in the mirror and know that the decision was the right one for both the business and its employees.
Not everyone can say that, and I know I’m one of the lucky ones.
