How to Get Strategic Buyers Interested in Your Business | Webinar Replay

Foreign. We are live everybody. So again, super excited for this webinar. I'll kick it off in just a second. But we typically do see a global audience, so this is going to be a ton of fun. While I'm going through all of this content, feel free to ask questions in the chat. I'll be sure to get to as many of those as I possibly can. Without further ado, let's get rocking. All right, so today we're going to be going over a topic that I really, really love. It is how to get strategic buyers interested in your business. So if you're looking to sell your startup, this is typically the buyer that you want to sell to. And why is that? Because they will pay more than a financial buyer. And I'll go over the difference between a financial buyer and a strategic buyer in a second. So if you're looking to sell your business, this is definitely the webinar for you. And again, if you have any questions as I'm going through this, um, feel free to put em in the chat. I'll be sure to get to as many as I can. But really the goal here is to teach you how to position your startup to strategic buyers. What do they look for? What gets them interested? How do you actually pull off a strategic acquisition? They are way less common than financial acquisitions and that's for a reason. They don't necessarily buy as many companies as opposed to say a private equity firm because private equity, their whole business is buying companies. So strategic acquisitions, you really need to position your business in a way where it's a one plus one equals three scenario that makes it a no brainer for a strategic buyer. Now just brief introduction of the agenda for today. Really going to go over again understanding strategic buyers and why they pay more. How do you essentially track these types of buyers to be interested in acquiring your business? What are some key strategies that you can take away to understand? How do strategic buyers assess businesses and what are they really looking for and how to position your business effectively knowing these key strategies and, and then at the end just how does acquire.com help connect with strategic buyers? So if you're interested in potentially selling your business, how can we help@acquire.com so for those of you that don't know me, my name is Andrew Gazdecki. I'm the founder and CEO@acquire.com I previously founded two different startups. One was called Business Apps. It was a do it yourself drag and drop mobile app builder and cryptocurrency exchange Altcoin IO Both of these companies were acquired. One was to a financial buyer, private equity firm and then the second one to a strategic buyer. So know a bit about acquisitions myself, we've helped over 2000 startups get acquired@acquire.com and I've been on the other side of that as well with other companies. And then below that are some cool awards that I won for the company business apps. And we are throwing a live event, it's called Acquire Live. So if you're interested in learning more about this, we have just a handful of spots left. I'm super excited for this. It's going to be April 9th in San Diego, so I noticed someone mentioned they were in the snow. If you want to come down to San Diego, meet the Acquire team, go through a series of fantastic workshops for both buyers and sellers. Reach out to the Acquire team, We'd be happy to get you registered. And again, this is an in person event in San Diego. It's going to be awesome. Whole team's going to be there, it's going to be a packed house. We're already basically at the maximum capacity for registrations. So if you'd like to learn more, reach out to anyone on the team and we'd be happy to tell you more about it. And then if you're not familiar with what we do, at acquire.com, we are essentially building the world's most founder friendly startup acquisition marketplace in the world. That's our mission and in terms of impact, we've been in business about four years. We've helped over 2,000 startups get acquired. We facilitated over half a billion in closed transactions on the platform. Today we have over half a million registered buyers. We have over 2,000 live listings today and we've served over a hundred plus different countries, so transactions all over the globe. It's awesome being able to serve so many different entrepreneurs. Truly the best job in the world, and diving right into it. So who are strategic buyers? The definition is companies acquiring businesses to complement or strengthen their operations. Essentially these are companies buying other companies where they're going to see some sort of synergy. They're going to see some opportunity for them to expand into a different market, a different geography. It could be for reasons like cost savings. Maybe they're looking to develop a similar product and this could speed up their time to market. They're also operating on a different timeline. So what this means is they have a longer term outlook. They're going to be thinking in decades rather than quarters or years like a typical financial buyer would. Be looking at. And the benefit of this is as an entrepreneur, the multiples are just much higher when you sell to a strategic buyer. And that's because the businesses that they're buying are just so much more valuable to them than it would be to a financial buyer. That's kind of the simplest way to put it. A strategic buyer could essentially again expand into a new market, adopt a new product to sell to their existing customer base and immediately see a return on investment. And that's something they're going to want to invest in to grow further and grow their existing company. A private equity firm is typically operating on a three to five year timeline where they're going to look to buy a business, improve some things, and typically resell the business or not all financial buyers are the same. But that's typically the reasons why strategic buyers are going to pay so much more for businesses is they just have such a higher ROI to them and their company. So I touched on this a little bit just now, but why strategic buyers pay more. Again, they're working on a much longer time horizon and this is a big difference to understand. So when you're positioning two strategic buyers, understanding how they operate, how they're thinking of a return on investment is going to be key to get them interested. They're going to be valuing synergies over financials alone. So this is an interesting point. You hear all the time of, you know, large strategic acquisitions for, you know, small startups. And in these scenarios, they're more than likely not focusing heavily on financials alone. They're looking at the ip, they're looking at the team, they're looking at the future potential of this acquisition opportunity. And again, that's where the multiples come into play that are going to be much higher than a financial buyer and they're going to be focused on market positioning rather than short term cash flow. And one example of this would be when Cisco acquired a company called Splunk for $28 billion to expand its AI data analytics capabilities. Essentially, Cisco saw that they were behind with the AI race. They needed a data platform like Splunk. They knew that it would just take way too long to build this on their own. So they acquired the business to get them into that market much faster than they ever could. And a lot of companies, this is how they essentially grow, because they grow through acquisitions. And it's a very, very smart strategy. So market trends that we're seeing in strategic acquisitions in 2024, we saw deal volume go down, but deal value go up. So if you're an entrepreneur looking to sell your business, this is good news. Meaning valuations are going up. But this also means that strategic buyers are being more selective with the acquisitions that they are looking to do. But they're also paying a premium to get these acquisitions done. I'm going to check the chat real quick again. If you have any questions, put them in. I'd love to make this as interactive as possible. So I'll, I'll pause for a second. Does anyone have any questions on, you know, what I just covered or could I go into more detail on any of those topics? I'll give everybody a second, but again, feel free to drop these questions in the chat and I'll come back to that. So here's kind of the. The whole way to position. Okay, we got one question. How to tell us more about how to position. I got just a slide for you. So these are all the ways that. And there's many more than this, but this is a good way to think about how do you position your business for strategic buyers, right at the top is going to be identifying what makes your business stand out. Every strategic acquisition needs to have a compelling reason for the strategic buyer to want to acquire your business. And there needs to be something that stands out to the strategic buyer where it's going to take them a long time to develop the IP on their own or enter a different market. So being able to essentially advertise or focus on what makes your business stand out as a key benefit for a strategic buyer is going to be, um, absolutely crucial. So the SEC second part here is going to be explaining how you've adopted to market trends. For example, have you adopted AI? Have you shifted your business based on a market trend such as remote work is really big and if you have an HR platform, have you adopted that trend? Usage based billing is really a trend that I've been seeing. Have you adopted something like that? Basically, trends in the market where maybe a larger company might be slower to adapt, are you able to help them, you know, go into that market trend much faster without needing to build something new? Number three would be protecting proprietary technology. So when I think of this, I typically think of data. Do you have a unique piece of data that your company has amassed over periods of time? That again, would just be really, really hard for a strategic company to just enter the market and capture what you already have. The fourth one would be calculating potential cost savings. When I think of this one, I think of how long did it take to develop your ip, how long would take a potential acquirer or to access a potential customer segment. There's many different angles here. You could also argue, you know, by acquiring your company they could reduce their cost with maybe they have in house an in house partnership where they're referring customers over to a key piece of technology. An example here would be maybe it's a big March platform and they have an email component and they refer all these companies over, excuse me, all these customers over to use this email component. And if they brought it in house, they'd be able to save the costs on that partnership and offer this directly to their customers. Number five would be revealing combined growth opportunities. This one is probably the first one everyone gravitates towards. Can you help this other company grow faster than they would on their own? So this would be a combination of kind of all the points here and probably arguably the biggest one is again, is there a one plus one equals three scenario where maybe you sell to the same ICP and you have an additional product that they can immediately sell to this customer? I like to think of GoDaddy in this scenario where GoDaddy is a company that sells to small businesses. They sell websites, email marketing, they sell social media tools and they have acquired all of these tools. So they have an ICP where they have a really deep relationship with this customer and their whole business is fueled on just selling more products to this customer that they know they're going to need. They're going to need a website, they're going to need email marketing tool, going to need a social media strategy, going to need a domain. Um, so thinking of ways to help the strategic buyer grow faster is going to going to be absolutely key. Number six would be talking at the strengths of your team. Do you have expertise in a specific segment or specific market? Are you an extremely technical team and you could help them with the adoption of AI? Company wide things like that can be definitely reasons for a strategic buyer to get interested. Number seven would be how easily do you integrate? The way to think about this one is do your cultures match? Is it going to be really hard to integrate your company and your team and your product or is it going to make complete sense? Is there a synergy with how you view business and how your company operates with theirs? Because integration is also a key part of making strategic acquisitions successful. This is sometimes the number one reason that strategic acquisitions don't work out is when a strategic buyer acquires a company, it is a big lift for them. It's going to take a lot of their team's time, a lot of their team's resources. And if the two companies aren't able to integrate, it's never going to work out. So understanding if there is an integration fit from the onset is going to be huge. And then being able to demonstrate a lean scalable business. For example, if you think of a company like Calendly, where it's a product that has product good growth, they're able to sell the product without a big sales team, that's going to be a very attractive business to acquire because acquisitions, they do get complicated with really large teams and managed services. And, you know, so if you're able to demonstrate that your business could essentially fit in like a puzzle piece, that's going to be a very attractive acquisition opportunity for a strategic buyer. And again, you need to identify your competitive edge. You need to figure out what are you, what are you best at, what makes you unique, what makes you a must buy for these larger companies because they have a roadmap, they have objectives that they're trying to accomplish and you essentially need to come in with an offering so compelling that you interrupt that you interrupt the product roadmap that's already set in stone, the full financial plan, and essentially they just can't pass this opportunity by. It's that big. So understanding what is the advantage, because that's what they're going to be asking themselves. And the more obvious you can make that, the better. So starting at the top would be technology advantage. Is there an algorithm or an AI model or an integration that competitors can't easily copy? For example, if your Salesforce, and this is a company I previously worked at for a short period of time, this company, their name was Spiff, they essentially automated sales commissions for really large sales teams. And the problem they were solving was sales teams would typically track their commissions in manual sales spreadsheets. The, the sales teams never knew what they were making on commission until the end of the month. There's tons of errors, et cetera, et cetera. So they built this really nice integration with Salesforce where you can integrate Salesforce. They pull the data and they calculate sales teams commissions in this beautiful dashboard that motivated sales teams. It was awesome. And so Salesforce looked at this and they said, okay, this is, you know, a very compelling product. They had some machine learning and AI models that would essentially motivate sales teams and automate this in a way that was compelling enough for Salesforce to want to build this into their product directly. And instead of doing that, they acquired the company and now they're Integrating the Spiff Commission platform across all of Salesforce's customers because they just looked and said this is going to be really, really hard to build ourselves and just acquiring this, it's already integrated in what we do as a company. Salesforce, the CRM made a ton of sense. The next one is going to be customer attention. This really just goes along the lines of you need to have a great product. Happy customers, really showing that if a strategic buyer was going to acquire you, there is a lot of happy customers. You're already serving them well and if you had access to more customers it would just fuel growth. So low churn, high net revenue retention rate, a loyal user base that's prime for cross selling. So I like to bring up the GoDaddy example here again which is they have millions of small business customers and they actively pursue opportunities where they can increase the amount of products that are selling into this customer. Operational efficiency. Do you have a really unique go to market engine? Do you have automated onboarding or self serve adoption that reduces customer acquisition? Increased margins with this one. Sometimes I like to think of companies that have bought media companies. You could argue that Microsoft acquiring LinkedIn was a media play because they had access to millions and millions of B2B customers where they can sell different products. Or HubSpot acquiring the hustle. There's a number of these acquisitions but essentially if you're able to give them access to a specific customer that they can sell their products to at a lower cost than they're able to now, that is a huge competitive advantage. And it's really easy to draw the line to ROI on an acquisition like that. So the key question is why should a strategic buyer acquire you instead of building it themselves? The answer needs to be really obvious. Again, we're talking technology that would take them years to build and millions of dollars would have to be tens of millions. Can you get them there faster? Can you accelerate entrance into this market? Customer intention. Is there a cross selling opportunity? Does your product fit really well into a portfolio of products that they could offer to their existing customers? Then operational efficiency. Are you able to acquire customers at a lower cost than they are currently doing? So those are really, really obvious reasons to me for a strategic buyer to want to acquire your company. All right, I'm going to pop over into the chat a little bit. Any best practices for calculating value of IP of algorithms as well as low to zero churn? Definitely. So it's going to depend on the buyer. What I mean by that is the value of your IP is Going to be much different in the hands of different buyers. So if I've developed a brand new product that sells, I'm going to use the GoDaddy example again. If I've developed an amazing product for small businesses, they love it, but my revenue is only, you know, 100,000 a year or something like that. But I'm already showing really, really great signs of, you know, this being something that every small business is going to want. That business is going to be worth way more in GoDaddy's hands than say a financial buyer where you're going to get typically a multiple on the revenue. Um, so understanding where the need is with a strategic buyer is going to be critical to getting a value on that. We have an interested buyer that is basing our value on a two year return even though they're really a strategic buyer. I mean that's a, that's going to be a negotiation where again every buyer wants to pay typically as, as little as they can. It's kind of the harsh truth. So if you see a lot of value in their use case, sometimes when you're in an acquisition just asking like how is this acquisition, how does it fit into the existing business? Is it financial? Does it, you know, understanding are they trying to add this to their portfolio products? Are they trying to enter a market segment? Understanding where the value is can be huge. And that gives you a good negotiating standpoint because you know how valuable this acquisition opportunity is for their company. Okay, I'm going to keep it moving and again at the end I'll, I'll be sure to answer a ton of questions. That's usually one of the funnest parts is I'll go through and I'll try to answer, you know, 15 or 20 questions. So keep them coming. Okay, so again we're going over how to get strategic buyers interested in your business. We're going to be talking about adopting the market trends or how are you adopting the market trends or how is the strategic buyer not adopting to market trends? You want to highlight agility in responding to market shifts. You want to position your business as the missing piece in a strategic buyer's portfolio. An example of this is a HR platform that quickly adapts to changing employment laws such as remote working contractors. And what I'm really trying to highlight here is business is always shifting, there's always changes. The biggest one obviously is AI that's hit every single industry and there's so many larger companies that are still flat footed with AI. They don't have an AI. Strategy. Maybe they have a small ChatGPT integration or something like that, but they don't have a true bottoms up. How do we rethink our organization with AI? So you could be a team matter and this is just one example. It could be so many other different market shifts, but maybe you're a team of AI experts and you're able to come in this large organization and streamline all their workflows and really help them operate in this new AI first world. Maybe you have an AI first product that really could complement their existing product and their customers would absolutely love it. Basically helping larger companies adapt to what's changed in the world because you saw it early and it was much easier for your smaller company to ship to this market trend. So that's a big one. And you can also position yourselves as, you know, experts in this trend as well. With the example I gave. And there's tons of old clunky HR platforms where maybe they haven't really fully adopted a certain HR workflow. Maybe you're experts in this new way of working. It could be a number of things, but again, look for trends in your market and have the largest competitors adopted those trends and can you help them with that? Protecting proprietary technology. This is going to be, you know, amazing technology that you built or just data that can't be easily accumulated by a larger company. An actionable step here could be looking at patents, if it's applicable, trademark copyrights. An example would be Twilio being acquired by Segment or excuse me, Twilio acquiring Segment because, oh, the other way around. Twilio acquired Segment because first party data control was critical for them. Again, this is a data play where they wouldn't be able to gather all of that data on their own quickly enough. So this was a very valuable IP acquisition for them. Obviously Segment was much larger, they had hundreds of millions in revenue. But the thought is still there where they wanted to acquire this data and they wouldn't be able to do it without acquiring another company to do so. And so it made a ton of sense. Next would be identifying cost savings for acquirers, how your business streamlines processes for an acquirer. So an example would be CR Systems. Customer data access to new markets, operational efficiencies. Are they looking to enter a market? And you can get them there much quicker. They don't have to spend, you know, tens of millions of dollars, make mistakes, learn certain things, hire a team, create a whole plan. Because larger companies are, they move slow. It's just, it's a cost of doing Business at scale. And so the example I have here is Atlassian acquire Trello instead of buying a competitor or excuse me, instead of building a competitor, saving them years of R and D. And that years of R and D is opportunity costs where they could be in the market. They could be selling this to their existing customer base and having to build the product, build it correctly, avoid mistakes. It's almost impossible to execute a strategy like this without any mistakes. And so if you're able to, you know, deliver basically perfect execution because they know that your product in their hands of customers will save them a ton of time and generate a lot of revenue, that's going to be a big reason for a strategic buyer to be interested in acquiring your business. Unlocking growth opportunities. This is cross selling, upselling, expansion. Can you help drive adoption into a new market? Sell an existing product to their existing customers. Can you help them get into a region of the world that they're not necessarily familiar with? This could be maybe one of the most common reasons for a strategic acquisition is there's this very clear growth opportunities when the two companies join forces competitive positioning, how acquisition enhances a buyer's market power. And an example of this would be HubSpot acquiring the Hustle where they essentially added a media arm to upsell SaaS products. They saw an overlap in the customer ICP being young tech forward entrepreneurs, perfect audience that is looking to potentially start businesses and adopt a HubSpot early so they can grow with the CRM. So thinking of these types of opportunities and presenting them to a strategic buyer is massive. And don't assume strategic buyers will be able to see these opportunities themselves. You know, initially you want to position your business and almost be the expert in, you know, how this could work together, at least enough to start the conversation. But this is where you know you were selling your business, you're getting in front of the right people. You're positioning in a way that has a clear advantage for strategic company to acquire business for reasons such as to grow faster. That's a very, very obvious one. The value of your team. So this is where your leadership and key team members are critical to the success. Meaning you have expertise in a certain region, you have expertise in a new market shift, you have an understanding of a certain technology that's really, really hard to understand. And the key part of this is you're definitely going to need to structure incentives to retain these key members post acquisition. And the example here I have is Stripe acquiring paystack. Paystack is based in Africa and this allowed the Stripe team to have deep expertise in the African fintech market. And this is a part of global expansion where they're able to expand globally because the team understands the different ways of doing business in different areas of the world. And they acquired a team to help them execute on that. One part about the team and yourself as an entrepreneur to understand when you sell to a strategic buyer as well is they're going to want to have you stay on. So I hope that's okay with you. Without that, a deal is likely to not go through at all. If you sell to a financial buyer though, you could likely, you know, leave within 30, 60, 90 days. That's a very common negotiating tactic. Um, so I have some entrepreneur friends where they, you know, they understand where they would never be able to work at a larger company. And so whatever earnout or transition is negotiated, they factor in just, you know, hey, I'm going to leave to start a new business, whatever it may be. Others are very mission driven where, you know, they can see themselves, you know, entering a larger company and continuing to grow the business for five years or 10 years down the line. And so having that attitude with these conversations with strategic buyers is huge. Where you're painting this vision of the future where you and your team are able to come in with expertise that they don't have in house and you're willing to structure a deal where you stay on post acquisition to make sure that this acquisition is extremely successful. Because the success of these types of acquisitions are always driven post acquisition. What I mean by that is through the integration or through cross selling the product to their existing customer base. It's not necessarily, it's very different from a financial acquisition where, you know, you're essentially getting a multiple on future cash flows. You're looking to grow this business and expand more than you are today. The next slide here is ensuring a smooth integration. I touched on this a little bit, just the importance of it. You really need to align company cultures to make sure that these acquisitions work. If the two teams don't get along, it's just not worth it. It's too much time, it's too expensive, um, it's too much of a distraction. Do things like prepping due diligence materials ahead of time, just making the buy easy for buyers. And this is just good advice for any type of buyer, but especially strategic buyers, because again, buying business businesses isn't their core strategy. Some companies, sure, but for most it's not. And so most companies, they don't have a head of corporate Development. They don't have an in house team exclusively focusing on these types of acquisitions. The larger companies definitely do. But just assume anything you can do to make just this whole process easier is definitely going to be in your favor. An example of this would be Microsoft and the GitHub acquisition. Where Microsoft embraced GitHub's developer first open source ethos. They kept GitHub independent while investing in its growth. There's just a good fit Microsoft, a very, you know, software driven company. GitHub as well. So I think that was a good example of a, where two company cultures were able to integrate well. But this is something that all strategic buyers are thinking about is what is the, what is the opportunity cost, where could this fall through? And a big piece of this is you acquire the company, the teams don't get along, business grinds to a halt and the acquisition is then probably deemed a failure. Demonstrating scalability. This is where you're going to be looking to show revenue growth potential with existing assets. So again, your product, your customer base, your geography, do you have lean operations that can expand efficiently? Meaning is it going to be really hard to deliver your product or your service to let's say a million more customers on the extremely high end, but let's say it's 10,000 more customers. If they brought you 10,000 more customers today, would you be able to service those customers? Or is there a 30 month onboarding period or excuse me, 30 day onboarding period and there's, it's just going to be really challenging to, you know, deliver that and then if that's the case, you have to hire more people. So thinking through that, like is there ways to streamline your existing operations to make them leaner and operate more efficiently? And I love the calendar example. It's just a beautiful business. It's a simple calendar link. They, you know, don't necessarily need a sales team and they can scale to millions of customers with a product led growth model. Um, so minimal sales team needed extremely high margins. This is a very easy business to integrate into another company. It's essentially, it's everything is about the product. Users can sign up. I'm sure you're all familiar with calendly, but just thinking through this, if you were to go into a strategic company, what does that look like in terms of the scalability of your offering? Is there constraints that need to be discussed or could be streamlined before you even start the conversations? If you think about those things now, the better. And then one case study of a strategic acquisition that we did@acquire.com, a company called SmartPath. They were acquired April 2024. SmartPath is a pricing intelligence platform for TaxPro. They were acquired by a company called Smart Vault, a client and co portal for accountants. Smart Vault gained us and product expansion and hired founder svp. And we see tons of acquisitions like this where it's just a great compliment to an existing company's portfolio of products or services. Uh, they acquire an amazing team that can help step in as VPs or other high level roles to push on growth even further. There's just so many good reasons for strategic buyers to acquire other businesses. And these are some of my favorite acquisitions because combined together they get to go farther, they get to continue to improve their products together and just make tons of happy customers. So definitely love those. And then again, what strategic buyers want, they want synergies way more than just financials. Financials are always important in acquisitions but the synergies are going to be what every strategic buyer is looking for. At the end of the day you need to focus on positioning. It needs to be top of mind in terms of what is your competitive advantage. Why should a strategic buyer be interested in acquiring a business? What can they essentially what can you accomplish together? That's the best way to think about it is you are only successful if they're successful. And how do you paint that picture of the world where I've talked about it a lot but what markets can you enter? What areas of the world can you expand to? What expertise can you bring into the organization where it truly is a win win acquisition. Show potential for cost savings, growth, integration, ease. This is just things that you can outline during the process or during the reach outs to get them excited about how you can work together and then definitely, you know, showcase the amazing parts of the IP developed and emphasizing the amazing team that you built. These are, you know, your core assets. What is unique about them? How long would it take another company to put together a, or is it even possible or build the technology that you built? This is going to be again absolutely key to getting strategic buyers interested. And then if you want to reach out to strategic acquirers, we do do this in house@acquire.com so what this means is when we work with startups and let's say there's a specific group of buyers that we feel would be perfect fits to acquire this business, we'll put this together on your behalf. We'll outline the key reasons a strategic buyer should be interested. What is your competitive advantage? Why should XYZ company be interested in acquiring your business and will help position your business to these larger companies to number one, maximize your acquisitions. That's our main goal@acquire.com and really create a process when working with us where you have multiple different companies interested in acquiring yours. And this is how we achieve the highest multiples when working with different startup founders. And it's. It's definitely kind of an art. You know, you need to look at every buyer uniquely. Where we need to understand what is the advantage, why should they be interested? And we map out this universe of potential strategic buyers and really build the business case. Why does this make sense? So if you're interested in potentially learning more about the service, reach out to us. We'd be happy to chat. We can research your market, find the right candidates, position your business for high value, seamless exit, and then execute the outreach campaign that maximizes interest. So we'll do all of this on your behalf. So now I'm gonna hop over to some questions. I hope, I hope you all enjoyed that. What'd you think? Put in the chat and I'll go through and I'll. I'll just start answering questions. I. I got time for. It's looking like 15 or so. Very helpful. All right. Good insight. Thank you. Loved it. All right. Oh, baby's got a dentist appointment. Good luck with that. This is helpful. Thank you. Appreciate the info. Awesome. Appreciate all of you. So keep the questions coming. I'm just gonna go. I got a list from my team over here. Okay. So what exactly differentiates a strategic buyer from a financial buyer? Really the reasons why they're buying the business. Strategic buyer is looking to grow their business further. They're looking for synergies, they're looking to expand into a new market. They're looking to deliver a new product or service to their existing customer base, while a financial buyer is typically looking to acquire business, grow it further, and either hold or resell it. Um, so basically grow an existing business or acquire business standalone and see overturn on investment from the existing cash flow. So one is going to be pressing for growth, and one is going to be maximizing the existing execution of the business. Okay. Why do strategic buyers typically pay more than financial buyers? The simple answer there is the businesses are just worth more to strategic buyers because there's so much more value in expanding to a new market, to, uh, building a portfolio, products or service, or increasing your brand reputation or your dominance in a certain market. Or sometimes it's the opportunity costs where if you're a company and you're behind in a certain market segment and you see a small competitor rising up and you aren't able to quickly catch them acquiring. Maybe something you have to do to essentially not go out of business. This is a big reason why Adobe was looking to acquire Figma, because they were viewing Figma as a, like a, a very real threat to the livelihood of their whole business. And the acquisition fell through, if you all are familiar with that story. But that's also a big reason why this is kind of a tangent. But strategic buyers, they will acquire businesses out of fear where they're worried that this is going to be like Facebook acquiring Instagram. Instagram, you know, they generate. Facebook acquired Instagram for a billion dollars and I believe Instagram now generates a billion dollars every week, something crazy like that. So if Mark Zuckerberg didn't have the foresight to acquire that business, they could have genuinely been the one company to really compete toe to toe with Facebook. That's up for debate, but that's why they paid such high multiples. One industries are seeing the most strategic acquisitions right now. For us, we, you know, specifically work in the software segment. So that market is definitely picking up from my vantage point. And I think this is going to be a trend that accelerates over, you know, this year, 2020, 26 and so on. How do strategic buyers evaluate a business beyond just revenue and profit? I would say just a quick answer here would just be market opportunity, ability to, to grow or reduce costs or acquire an asset that they would normally have to develop in house. What are some red flags that turn strategic buyers away from a deal? This one I would say, you know, cultural fits, not having confidence in the product. If churn is really high, a lot of the same things you're going to see in really any acquisition. You know, messy financials, you know, lots of customers complaining about the product, legal issues. But I think the biggest one is going to be where if they're just not confident that what you've built or what you've developed has a competitive advantage. Is it easy to copy? Is it, Is there a barrier to entry? Do you have a moat around your business that's going to essentially get a strategic buyer not interested. What are the most important factors in making a business attractive to a strategic buyer? I'm going to do short answers on all these for this one. I'd say if there's not an obvious synergy between the two companies, meaning you don't share the same ICP or you aren't able to accelerate a business objective for them, Whether that's expanding to a new market or entering a different product segment, if it's not obvious, then I don't think it's going to work out. So that's an important factor. How can sellers clearly showcase synergies that would appeal to a strategic buyer? I'm just going to plug acquire.com here. This is something that, you know, we're experts at and we could help showcase these synergies. But I mean, it's great questions to ask yourself as a founder is what is unique about my business and what is valuable to one of these larger companies. And the start of that is understanding, you know, what is important to the strategic buyers in your universe, meaning your competitors, other companies, your competitors competitors, or other buyers in adjacent markets where again, you have a similar customer that you're serving. Let's say it's HR professionals. What other companies sell different products or services and what's important to them? So clearly showcasing those synergies is, you know, is it your product, is it your team, is it your brand, is it how fast your company is growing? Understanding what that is is crucial. Are there any specific types of intellectual property or technology that attract strategic buyers? More AI. Everyone's looking at AI advantages right now. 100%. How should a business owner structure their team or leadership to increase interest from strategic buyers? Good question. For this one, I would say be very open to earn outs. Long periods of long transition periods. Essentially, you know, you're going to need to go into this company and integrate the business, continue to grow the business and there's obviously going to be financial rewards tied to that. But it's a given. I think in these conversations it's so critical to just communicate openly that this is something that you're excited to do and you're more than open to. And like, you just know this is part of the deal. What role does branding or market positioning play in making a business attractive to a strategic buyer? Quite a bit. Quite a bit. Because you might already be on the radar. So when we do the outreach, it's so much easier to get that across. When I love getting emails like, oh, I've been watching this company for a while, or I've already talked to so and so. That is because your branding and your marketing and your positioning have already reached the leadership team at the strategic buyers that you're reaching out to. Sometimes you can also, you know, get inbound buyer requests when you have really good branding, really good marketing positioning. So it's absolutely critical what key factors drive valuations higher in Strategic acquisitions, basically, just how valuable is the business to the strategic buyer? And then aside from that competition, having more buyers involved in the acquisition process is absolutely crucial. There's a saying that when you have one buyer, you have no buyers. And so a big part of what we do at acquired.com is we create a process where we bring a lot of competition into the deal. And this is crucial because it gives you leverage when you're selling your business, and it also gives every buyer reason to act. We never want to be in a situation where we feel like we're the only, we have only one buyer at the table. That's completely fine when we do. But we view our job as driving as much interest into the acquisition opportunity with as many buyers as possible because that helps us drive up better terms and then better valuation. What key factors drive. Same question. How do strategic buyers typically structure their deals? We see a mix, you know, large cash, upfront earnouts, equity in the acquiring company. So it definitely would be a creative deal structure where very rarely are you going to see an all cash acquisition and a strategic acquisition. But it's, it's not impossible. It just doesn't align the incentives, meaning the buyer wants you to stick around and an all cash deal doesn't necessarily incentivize you to do so. All right, we're getting to 11:45 here, so I'm going to answer just two more questions and then let's see. Are strategic buyers generally more flexible with deal terms compared to financial buyers? Yes and no. I would say they're less sensitive to valuation, but they're going to be less flexible on earnouts, agreements to stick around and make this a success together. Those can be deal breakers. I think even negotiating those too aggressively can push deals sideways. What current market trends are affecting how strategic buyers approach acquisition from the macro level? You know, I think the regulatory environment the past few years has been restrictive for really, really large acquisitions. But then just also interest rates, you know, acquiring companies has especially larger acquisitions, has been more expensive, and a lot of that is changing and shifting, which is, which is great to see. Which leads I say into this next question. Okay, this is going to be the last question and then I have to have to catch you next time. How do economic shifts such as interest rate changes impact strategic buyer activity? Um, it's pretty huge. I mean, when, when these things shift, especially when interest rates go up, acquisitions become more expensive, but when they're lower, it, it could be a very economical way to, to fuel growth for larger companies. All right, everybody. I hope you enjoyed all of that. That was a ton of fun. And again, if you're looking to learn more about strategic acquisitions, maybe you look at your company and you say, man, this would be the perfect fit in XYZ company. Reach out to us@acquired.com. we'd be happy to walk you through our process, how we navigate communication with strategic buyers, how we can position your business best to these larger buyers, and how we could potentially help you get acquired. So thank you so much for joining everybody. It truly is a pleasure serving all of you. I hope you learned something. And we will be sending out a recording. We're happy to get the slides over to you as well. Have a great rest of the week. And thank you again, all of you, for joining.