How To Prepare Your Startup For Acquisition

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How To Prepare Your Startup For Acquisition

Uploaded by

Marcel Eboa

We take content rights seriously. If you suspect this is your content, claim it here.

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Download as PDF, TXT or read online on Scribd

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Finally – someone has offered to buy your startup.

You’ve been waiting years for this moment. You feel euphoric, excited. Dreams of
life post-acquisition flash through your mind.

But then the nerves kick in.

How on earth will you prepare for this acquisition?

Because the hard work isn’t quite over yet. If you fail to prepare, or do so badly,
you could deter the buyer, hurt your valuation, and net yourself less money.

Then there’s your team. Are they aligned to this new company? What can you do
to make the transition easier for them?

I’ve been through the acquisition process several times, with two successful
exits under my belt. So I’d like to share what I’ve learned. Hopefully, it’ll give you a
smooth ride to the finish line.
STEP #1 Don’t stop growing

Acquisition offers are just that. Offers. They’re not

set in stone until the very last moment. So yes, be
excited. Yes, prepare well. But whatever happens,
don’t neglect the growth of your business. Stay
the course. Keep to your targets. After all, it’ll only
improve your company’s value, and you won’t risk
your startup stalling if the deal falls through.

STEP #2 Do your homework

Acquisition stories are everywhere, good

and bad, so learn from them. Avoid others’
mistakes. Find out how the acquisition will
affect you and your teams. Reach out to
other entrepreneurs, particularly those in
your industry who’ve sold businesses before.
They’ll have practical advice to navigate the
process successfully.

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STEP #3 Get your records in order

The buyer is going to audit the hell out of you, so consult

your accounting, legal, and HR departments and get your
house in order, including all relevant paperwork. Discrepancies
during due diligence can kill acquisitions, or at least, hurt your
valuation. So if recordkeeping is your Achilles heel, get it fixed
fast – your buyer will be looking for mistakes.

STEP #4 Hire professionals

In fact, enlist some outside help for due diligence.

While I’m sure your staff is competent, we’ve
already established (in step 3) that mistakes can kill
a sale. So hiring professionals with specialized
knowledge of acquisitions and the necessary
preparations can be a big help. Here are some to
consider:

CPA FIRM: VALUATION FIRM:

A pre-sale financial audit gives the Unsurprisingly, the buyer wants to pay
buyer independent, legal confirmation as little as possible. Get your business
of the veracity of your records. This independently valued and you’ve got
helps grease the wheels, so to speak, an accurate, fair number that will hold
and will inspire confidence and trust. water under intense buyer scrutiny.

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FINANCIAL/ACCOUNTING LAW FIRM
SERVICES:
Expect to prepare pro forma statements, A great firm will help your staff
financial schedules, expense accounts, organize and standardize legal
revenue reports, and much more. The buyer documents the buyer requests. It
may also ask for earnings predictions and might also alleviate the stress of
forecasts to gain an understanding of communicating with the buyer’s
cash flow, or even multi-year projections. own legal counsel.
Don’t overwhelm your accounting staff
(that leads to mistakes) – get some help.

While hiring outside support will cost you, their specialist skillsets leave little to chance.
With a crack team of professionals behind you, you’ll all but guarantee a successful
acquisition.

STEP #5 Communicate your expectations

You and the buyer have different goals.

It’s therefore important to weigh your own
expectations against those of the buyer to avoid
trouble. It’s not just about the money – think about
your life after the acquisition ends.

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For example, you should be able to answer these questions:

Are you staying on, and if so, what role and responsibilities will you

have? Will you have any say in decisions?

How will your product mesh with the buyer’s offerings and strategies?

Is this how you see your product being used?

If your expectations don’t align with those of the buyer, you’re jeopardizing your long-
term happiness. Some founders regret selling for this very reason.

STEP #6 Look for a culture fit

I’m sure you want the very best for your business and
your employees, but it’s easy to be suckered in by a
great offer and neglect establishing the buyer is the
right fit. Misaligned cultures cause painful transitions,
so you need to understand the buyer’s values, beliefs,
and how their mission statement supports these. Are
these ideas you and your team can stand behind?

Being acquired is a bit like selling a house. You want the best price and assurance the new
owners will take good care of it. To do that, you need to keep it clean, fix anything broken
or missing, and contract specialists to obtain independent valuations. You also need to vet
your buyer to ensure a smooth transition for everyone involved. Follow the six steps above
and you’ll walk away with more money, fewer headaches, and an unassailable confidence
you did the right thing.

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