Mechanics of a Small Acquisition | Hacker News Reader

Mechanics of a Small Acquisition

quotidianventures.com

153 pointsjhchen22 comments

Believing that the finish line is just yards away and finding that it is actually miles is not going to be good for your company’s morale.

I've learned this lesson the hard way. It's easy to get caught up in acquisition discussions, so be careful not to get ahead of youself. The cost for the acquirer to engage is much less. They are larger and sometimes have full-time staff devoted to M&A, while your startup's bandwidth is very limited.

It's also difficult to avoid getting so excited and consumed by the process that you lose focus on what your business is actually doing. The acquirer is sending their deal team but you won't have one working for you (even if you get a banker/broker, it still takes up a lot of the founders' time), so someone still needs to mind the store.

Interesting read, but for my part, I'm much more interested to learn _how_ to start the process. That is, tips on how to position your company to make it a candidate for acquisition. (Apart from a great product and name of course - got that). Ways to flag potential suitors? And ways to make it clear that you are looking for buyers? etc. Any pointers or text to look at would be much appreciated.

Ditto. I'd like to know if it is a process that really only starts once someone has noticed you, or if it is something an owner can push for. If so, what is the best way to do this?

Right now, my strategy is to pursue integration and use it as an avenue to acquisition. Not sure if it's the most viable method, though.

It's as with any negotiation: whoever needs the deal the worst is in the weaker position. There is such a thing as shopping a company around looking for an acquirer, but you're unlikely to get as good a deal as if they come to you.

Ok. Here you go.

http://maplebutter.com/getting-your-startup-ready-for-an-acq...

I've been through one acquisition. The acquirer came to us, without us really realizing their plans at the time of the first contact. Around the same time, we were also contacted by a few other parties. What I've heard from other people, this seems to be the norm at least in consumer internet space.

It's rare acquisition in which the acquirer hasn't followed your company for some time. So you are likely to have a better success if you get into radars of potential acquirers by suggesting biz dev deals first instead of direct acquisition proposal.

I've gone through one acquisition within the last year. Ours came about through a combination of us releasing a new feature and getting some pr that caught corporate dev's attention (they read techcrunch too you know), and we also tried to bring our acquirer on as a client around the same time so we were talking with people outside of corporate development as well.

It really is simple and very difficult, build a great product, get traction, wow your users. After that, be patient and keep doing it. The early exits you hear about are the exception, not the rule. When you begin a startup be ready to spend the next (on average) 7 years.

This is very reflective of the acquisition process my company went through when it was acquired(Priced at $13 million). However, one area that can't be emphasized enough is the distraction, time, and mental capital that this process entails. If you are not careful, it can hurt your business and its trajectory. Luckily, we had good people running the business for the founders while we concentrated on the acquisition process. One area not addressed very closely in this article is the difficulty of not sharing the possible acquisition with employees as you go through the process of gathering all of the due diligence data and having all of the meetings. Of course, keeping the acquisition process a secret from your employees isn't always required...but in our case it was. That added to the stress of the due diligence process for us.

There's little public information about small acquisitions and how they happen -- thanks for sharing. Everyone would be better off if there more information and transparency around these processes.

I went through a small acquisition (single digit millions) and we're building a membership site that would help people understand this process (from the seller's perspective) and the potential pitfalls, what sorts of things do you think must be addressed? Or perhaps need greater attention?

What are the things that drive price? What does the diligence process look like? Managing telling employees vs secrecy?

I've written an ebook about the due diligence process and I could write a post that explains it if enough ppl are interested

Yes please

Me too. Thanks.

Do you have a mailing list of anything else I can sign up to to be notified when this launches?

I thought Basil Peters' Early Exits (www.early-exits.com) was a pretty decent overview.

Glad you found it valuable. My mission is to debunk the standard myths, misperceptions and outright lies about the exit process.

I knew of one company that was, despite wanting to be acquired, made it as hard as possible. Someone showed up with the "accept no other offers for 90 days" and the company freaked out that they were being pressured. All discussion ground to a halt after that.

Has anyone collected advice for after the acquisition? I'm thinking things like:

* Give yourself six months or so after joining before finalizing plans to sunset your original systems. It gives you time to work out the lay of the land re: political and software integration.

* If you expect more manpower in development or maintenance, get it down in writing.

Thoughts?

Off-topic:

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