Getting acquired. It’s the dream of many an entrepreneur.
Sometimes it turns into a nightmare and you wind up losing it all. Sometimes it’s like Bill Murray in Groundhog Day with the same story playing out over and over again and you feel like you’re getting nowhere.
But sometimes the planets align and it happens.
In the 11 years since starting Altitude, we’ve seen our fair share of client companies get acquired. And while there’s no one-size-fits-all approach, there are some basic ingredients that are pretty darn consistent for those that have mastered the acquisition recipe and achieved the dream.
[Disclaimer: Please understand that we’re assuming you’ve got the basics mastered, like solid financial footing, an offering that differentiates itself in the market, huge upside potential and a great value proposition. It’s only after those ducks are in a row that you can start prepping for acquisition.]
Ingredient #1: Start with the end in mind.
You can’t get where you want to be if you don’t know where you’re going. Getting your company acquired is no different. While Google has been acquiring, on average, more than one company per week since 2010, best bet is to be a bit broader than just saying, “Google is going to buy us.”
You need to have a well-baked list of potential acquirers so you know where to direct your attention.
Is it a VC that’s actively acquiring companies in your space where your offering makes a logical addition to their portfolio? Is it the 800-pound gorilla in the market – and if so, how do you shake their tree to the point where they’re better off buying you than competing with you? Is it a well funded up and comer that would be able to significantly expand capabilities with your company offering in the fold?
Ingredient #2: Be realistic.
I had a call with a Silicon Valley startup last month. I always start with the end in mind so I asked about their goals. The co-founder said he wanted to be acquired within two years. Now, I’m all for being aggressive and optimistic, but I’m also a realist. The company barely had a product offering (beta version), had no revenue and were still operating like a pure startup in a hyper competitive emerging space. While you can catch lightening in a bottle, it’s just not smart to plan on it.
On the other hand, a quick track is possible. We had a case where a client had the three-year goal and it came through – but they had already been in business for seven years at that point.
Ingredient #3: Focus.
A great way to drive value of your company and become more attractive to potential suitors – especially in hyper competitive spaces – is when you go from general offering to a specialized niche. This focus, in turn, helps you focus on #1 above.
One of our clients who got acquired a few years back was a brilliant IT consulting shop capitalizing on a flurry of M&A activity among giants in the financial services, pharma and insurance space that needed massive systems integration work. They could pretty much do anything for anyone. They had credibility and respect. And they grew revenue that way quite nicely.
But it wasn’t until they made the very hard choice to focus on one specific vertical that their plan for acquisition started to take shape. They were able to focus sales efforts, marketing resources, sharpen the message and invest wisely.
Ingredient #4: Shore up processes.
Many startups emerge quicker than their business processes. This can result in way too much expertise and knowledge in between the ears of those who will most likely exit during an acquisition. Codifying business processes, SOPs and best practices goes a long way towards unlocking the value of your company from the people in it today.
Ingredient #5: Sharpen the brand.
So you know the target companies. Your timing is realistic and you’ve sharpened your focus. You’ve got SOPs in place. Now you need to look the part. If you want potential suitors to give you a first look, you need to put on the big boy pants with respect to how the company projects to the market. Visually, you need to be pinstriped. Verbally, you need consistency and polish. You can’t continue to look like an underfunded startup or a neglected aging business.
Ingredient #6: Raise visibility.
Invest in your future. I had a VP of marketing say to me, “We want to double in size to $100m in five years,” but totally balked at putting $250,000 a year against marketing. That’s 2.5% of desired gain being invested in marketing. A beyond reasonable recommendation if you want to raise visibility and maintain awareness and viability so that when the opportunity comes, your company’s not overlooked.
On the other hand, we had a client that did all the above and then set about not to outspend its competition (which was also the most likely suitor) but to outflank them at the industry’s largest trade event.
He wasn’t afraid to invest in marketing – but insisted it was done strategically. With their target in site and their foundation shored up, the goal was “to get on the map” and have everyone at the industry’s leading trade show at least know the company name.
With a heavy dose of planning, elbow grease, booth etiquette 101 and smart marketing, the three-day trade event was turned into a six-month promotion for the company. Three months leading into the event there was a flurry of activity. Visibility-raising thought leadership was produced and disseminated through social, email marketing, targeted digital display adverting and retargeting.
A speaking engagement was secured for day one of the show and this was promoted. They solidified and promoted an all-star lineup of industry thought leaders to speak in their booth to drive traffic. And they distributed a multi-media pre-promotion for the must attend party at the event. The 3 days of the event were a whirlwind. Their qualified lead collection efforts outpaced the 800-pound gorillas by a margin of 4-to-1.
Fast forward six months and the 800-pound gorilla came to a very logical conclusion: “If I can’t beat ‘em, I’ll buy ‘em.”
If you add all of these six ingredients into your acquisition strategy mixing bowl and bake at a reasonable pace, over time, your dream of acquisition will have come true.