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What Is the Startup Acquisition Process Actually Like?


If competitors and other enterprises want to acquire your startup, then your team has achieved quite a feat. Plenty of companies start off with the hope of eventually selling high, but it is likely a very small fraction that actually manages to make it happen. For those about to embark on the acquisition process or hoping to in the near future and perhaps not all that familiar with how it will go down, here is a brief overview of what to expect.

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Deciding to Sell

It can be difficult just making the decision to sell, much less seeing it through. Although some startup founders know from the outset that selling will be the primary intention, others may become too emotionally invested or territorial to be able to step away. Of course, there are also a ton of questions that have to be answered before pursuing a sale, as the company's operations and finances must be in order. This decision must be carefully considered and cannot be taken lightly because the whole process can be quite taxing.

Courting Suitors

Once all factors have been considered and discussed and the team decides to pull the trigger, it will be necessary to test the waters rather cautiously. The best time to pursue a sale is when there are a lot of different options. Before having contact with any potential buyers, it is important to do some research to identify companies that are interested and able to acquire the company and to create a target list based on realistic parameters. Hopefully, other big players will get in on the action once they learn that the business is up for grabs. Throughout the process, a company should be engaged in conversations and negotiations with several other parties in an effort to narrow it down.

Assembling a Team

At some point before or during the introduction and courting phase, it is wise to begin assembling the team of professionals who will be needed to guide everyone through the transaction. This will obviously include a banker, accountant, and team of attorneys, but other experts may be needed as well if there are any discrete issues that need to be addressed, such as real estate or intellectual property matters. The sooner that all relevant players are added to the mix and kept in the loop, the easier it will be to keep things running smoothly once it all really starts to get going.

Fielding Offers

It will undoubtedly be tempting to take the first attractive offer that comes along, but this would likely be foolish because it may take time for the right offer to come through. Throughout the courting phase, it is important to keep sight of the overall deal and not just the price. Company leaders cannot and must not be afraid to ask a lot of questions and to demand excellence. Nonetheless, it is crucial to always keep an open mind and to have realistic expectations based on concrete facts and figures.

Preparing for Due Diligence

This is really something that should start from the very beginning of a company’s existence. It is critical for companies to document, organize, and retain all company records for various reasons, with the possibility of engaging in a due diligence investigation just one of many. It is advisable to establish a corporate repository that can also serve as or become a spinoff into a virtual deal room for when such a transaction arises. In the end, preparation and organization will be vital to a company’s operations before, during, and subsequent to any sale.  

Sealing the Deal

Once all of the pieces have fallen into place, the parties will need to select a closing date, and hopefully one that is not too far into the future, as more time usually just allows for more things to go wrong. It is generally best to operate in thirty, sixty, or ninety day timeframes, although larger and more complex deals may require a bit more time.

This is a broad snapshot of what all goes into the acquisition process, and it can obviously be a lot more intricate depending on the nature of the business and the sector in which it operates. Regardless, one of the most important things to ensure success will be exhibiting patience no matter what happens.