Getting acquired can be a time for celebration for founders, as all their team's hard work and sleepless nights pay off with an exit to be proud of. But not all M&A is created equal.
In a session at Vertex Intersect '24, our annual gathering of CEOs, technologists, founders, and investors, James Kim and Michael Hughes of Qatalyst Partners and Walter Pritchard of Palo Alto Networks shared their thoughts on how founders can control their destiny and get a better M&A outcome:
1) Build a strong company: This may sound obvious, but a company that's executing well with a strong product and focus will generally have better results than a company seen to be floundering strategically.
2) Play the relationship game: The seeds of successful M&A are often planted years before. Start building bridges with any company you think might one day buy your startup early on. At worst, you'll make more friends in the industry, which is never a bad thing.
3) Keep it classy: Potential acquirers won't want to do business with someone seen as lacking in integrity. Say what you do, do what you say, and avoid trash-talking your competitors. It reflects well on your leadership, and can pay dividends later.
4) Educate the market: Never stop teaching prospective customers and partners about what your product can do. Startups often operate at the bleeding edge; a potential acquirer may not know they need what you have until they fully grasp your technology.
5) Don't hide your skeletons: Any good acquirer will know that every startup comes with its share of baggage. The problem arises when you're seen as trying to hide the less-than-great elements of the business. If a key leader is leaving, or the product organization is seeing significant churn, be upfront about it.
6) Be thoughtful about strategic investments from tech titans: Taking money from a corporate venture fund can send a signal to the market that you've chosen your preferred partner. It doesn't quite close the door on exiting to somebody else, but it can reduce the likelihood of somebody else proactively starting M&A talks.
7) Don't overplay your hand: Sometimes, founders will try to speed up the process by threatening to walk away if arbitrary deadlines aren't met...and then, when the date comes and goes, nothing happens. The M&A process can move frustratingly slow, but trying to artificially create urgency can often backfire and undermine your negotiating position.
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