6 M&A Tips for Early Stage Tech Startups
Navidar | July 16, 2018
You’ve watched your idea blossom into a successful business, and now investment bankers are pursuing you. An acquisition of a business can be a challenging process. It demands lengthy discussions, many agreements, and lots of time. It can take you away from the demands of running your business, potentially harming your business before it can reach its peak value
So if you’re in the early stages of a startup or are bootstrapping your business into success, follow these six tips.
Keep Good Records
Acquirers want to know what they’re acquiring. They’ve been through the process many times, and they handle it in a systematic, detailed manner. You need to be prepared for the rigors of the process. Keep your records in an organized, comprehensible, electronic format that you can easily share and monitor. Your legal and financial teams can help you determine the right approach to record-keeping and disclosure.
Protect Your Credibility
Buyers don’t expect startups to be perfectly run. Every business faces challenges, especially in its early years. But you should know that acquirers will eventually uncover any and all issues. So don’t try to hide them. Get ahead of potential red flags by openly and honestly addressing them so that you can frame the narrative.
Use Your Advisors
Your key advisors can help you manage the daunting, complex nature of the M&A journey. Some owners are so protective of their companies that they don’t really let their advisors in. These experts are on your side, and can offer you the knowledge that only comes with experience. Allow them to educate you, and ask questions about anything you don’t understand. They can maximize your understanding and help you choose the ideal deal structure.
Remain in the Driver’s Seat
Every player in the deal has their own set of interests—none of them totally aligned with your own. So even when you work with a professional team, you must remain in the driver’s seat. Don’t allow the deal to gain a life of its own. You’re in control here. So know what’s happening, and seek advice when you’re uncertain what to do next.
The Devil is in the Details
Novice sellers typically focus on the aggregate purchase price. But value and costs can be buried deep in the deal terms. Consider how stock might be required to vest after closing, or how requiring you to remain on board after closing can affect your next chapter. Pay attention to the details, and seek sage legal advice. Focusing only on the final number is a great way to get taken for a ride.
Don’t Be Greedy
Be aggressive, but also realistic, when negotiating the final sale price and other deal terms. Listen to your advisory team, because they know the market best. When an acquirer has many options available, being too greedy can ultimately cost you money, while being a major benefit to your competitors. When a deal goes south, it can affect how other acquirers feel about your business, so plan accordingly—especially if you’re racing against competitors.
Navidar is an investment banking firm, providing companies and investors in dynamic industries with strategic M&A advice, capital raising solutions, vital insights and breakthrough opportunities. Clients can expect to receive completely independent advice and creative solutions – experiencing the difference between uncertainty and success.
We provide completely independent advice, vital insights and breakthrough solutions for your most challenging M&A transactions, capital needs, negotiations, boardroom issues, or business opportunities. Please contact us to exchange thoughts about how we might be able to best assist you in accomplishing your goals.