The best exits usually come about because of strategic relationship building followed by nimble decision-making. Silicon Valley Bank gathered tips from executives at a range of businesses, from startups to large-cap companies, on how to optimize exit value. Read on to get advice for navigating a successful exit. And read this related article for additional insights on preparing for an exit.
When should I make my move?
This is part of the start-early mantra. If you’ve identified an acquirer or two, you want to have a good relationship in place, if for no other reason, so you know when to be standing at the door when they need you the most. If someone is looking to fill white space, you want to be there with the go-to-market solution. (If you are already part of the stack, you’ve increased your odds.) If you have a customer niche or IP they are seeking, be the first to offer it up.
"Get in before the 'build or buy' decision is made, or you’ve missed the boat"
In most cases, you want to get in before the “build or buy” decision is made, or you’ve missed the boat. The bottom line, advises one large-cap business development manager, is that you want to be in a position in which “you create the process.” If you are close enough to an acquirer, you might even influence the timing. For example, pitch yourself when you learn they want to quickly ramp up revenue or make a big splash at an annual conference.
What can I expect if we start negotiating a deal?
By this point, you should know what your price is, and why the acquirer wants you. If you have employees to protect, spell out your goals. If you intend to stick around the company or pursue a new endeavor, this is the time to tell them. Keep the number of people involved in the negotiations to a manageable few, for confidentiality reasons.
"Don’t threaten to open your company up for an auction in the middle of negotiations"
Use advisors judiciously. M&A is really about relationships. Beware of bringing in an advisor you don’t already know and find one who knows the history of the acquirer. Pay for the experience. Of course, other strategic acquirers may get wind of your negotiations, and that would be a good thing. But unless you are the hottest company around, don’t threaten to open your company up for an auction in the middle of negotiations. The corporate dealmakers say overconfidence kills a deal faster than almost anything, except a surprise.
What will I need to disclose?
Everything. Every company has some deficiency. Acknowledge it and your plan for dealing with it. The potential acquirer’s CFO can run the same financial analysis you can and almost certainly has sources on the street who will spill any beans about you.
"The #1 deal killer is a surprise."
You’ll need to disclose the same kinds of information you would share to secure funding, including financial projections and marketplace analysis. Expect to hand over any documents reporting your company’s financial statements and records, as well as articles of incorporation and company bylaws. Remember: the #1 deal killer is a surprise.
Read more about optimizing your exit value: Tips for Planning the Best Exit: Set Yourself Up for Success.