Prepare For An Acquisition - Acquire.com Academy

In this video, I'm going to be going over how to prepare your startup for an acquisition in just six steps. There's obviously thousands of potential steps, but these are kind of the main ones. So I'm just going to talk about this from a fairly high level. So moving through this, basically you've got an offer, maybe you're looking to prepare your startup for acquisition and you just don't know what to do. And I was in those shoes as well. Like I thought acquisitions were basically, Google shows up at your door with a big check and you got acquired. But the more you again, understand how businesses are acquired, the better. And this is really just preparing you for what you really need to start doing and what you should always be focusing on if you're looking to sell your business quickly or if you're looking to sell it even within like potential years. Like my acquisition with business apps took, it was a substantial size business, so the acquisition was a little bit more complex than probably others. But sometimes it can take years. So, you know, understanding, you know, these aspects are crucial. So step one, don't stop growing. So the most attractive startups are the ones that are growing. They're, they're ones that are attacking a market. They built a brand, they have a ton of happy customers, they have goals, they have targets, they have an amazing team. Not every startup has that, and that's fine. But to ensure that you don't stop growing, that's one of the best ways to increase the valuation of your startup and get buyers interested in using a revenue multiple over profit. And so number two would just be doing your homework. Just acquisition stories, Read them the good and the bad. We have a lot of podcasts that we've done on Microquire in terms of what is an acquisition process really look like? So just understanding, you know, what is the legal steps, which I'll go over, what is due diligence, how does that work? How do I get my books in order? Which is the next slide? So do you have a proper P and L, which is a huge piece of a huge document that most buyers will ask for? That's almost the first thing I typically ask for if I'm looking to acquire a company. I'm looking at, I'm going to be requesting a P and L probably access to, you know, read only stripe analytics and Google Analytics. That's kind of where I start. But as you move forward towards an acquisition, you're going to want to have. For me, I needed to have every NDA I had signed that might Be overkill. So definitely just have everything in order where you have your marketing processes documented, you have your sales processes documented, you have your expenses and revenue and everything contained in the P and L. So a buyer can just quickly get a good understanding of your business. But obviously without giving up all the secret ways that your business works that you don't want to share. I always recommend hiring professionals as well. So if you're, you know, headed into due diligence, like definitely reach out to someone that could help you really make sure that this transaction goes through. And sometimes it can also put you at ease so you know that you have people backing you up. So when I sold business apps, I had a CPA firm. I use a financial and accounting firm, not a valuation firm, but I recommend that. And also a stellar law firm. So what this did for me was a CPA firm helped me structure an acquisition that was. It was the best structure we could do to optimize taxes. Like when you go to sell a business, like, do you know anything about the, the tax difference between, you know, an asset sale or stock sale? Or is there like, what. How do you maximize this exit as much as possible. A law firm definitely depending on the deal size, some smaller deals, if you're comfortable with it. Not legal advice, but I've heard of a lot of people doing that and not having too many issues if you use documents off Rocket Lawyer or something like that. But I used a big fancy law firm and it was worth every single penny. And then moving on to just other stuff. Communing your expectations with buyers. You and the buyers, they have different goals. So as a buyer, they either want to reduce your company and expenses and so it's more profitable, maybe they want to continue growing it. So understanding what your expectations are in terms of, you know, valuation, how's it going to operate afterwards? Just getting on the same page with a buyer can really make the difference in helping an acquisition close. So when you communicate your acquisition expectations, these are some ones that I thought of. Are you staying on board? What are your role and responsibilities? Will you have any say in decisions? If you're selling 100% of the business, you will not. How will your product match with the buyer's offering and strategies? Is this how you see your product being used? And if you're. If your expectations don't align, it may not be a good fit for you. So definitely speak to, you know, buyers about these things because they can be important. For example, the private equity firm that I sold business apps to, Business apps is still Active today. I built a mobile app on the platform today, not today, but a month ago. And it's fantastic. And so that was important to me to have something I had worked on for eight years to be alive in a few years. And I sold that business three years later and it's still going strong today. Depending on who you're selling to, if you're selling to a strategic buyer, this applies to most. But looking for a culture fit, even if you're doing a transition plan is, you know, if you're doing like an earn out, like can you get in? Do you, can you work at the company for a period of time? Are you the type of entrepreneur that immediately needs a clean break? So definitely discuss those things as well. And really just understanding that the acquisition process isn't as complicated as many people can make it seem. And there's just simple things that you can do. Just don't stop growing. Do your homework on acquisitions, get your records in order, hire professionals just to get, you know, hey, like we're going to be going into selling our company and we want everyone on deck. So when you receive an loi, you have an attorney that can refute like review that you have a proper CPA that can help you discuss tax matters that might really material impact the amount that you personally walk away with financially. Again, communicating your expectations with the buyers. This could be an I just want to sell the business quickly. So just openly communicating that like not really holding, not playing this game of like we're sort of for sale, but like not really for sale unless you pay, be upfront, like have that open conversation early and see if that aligns. And then if you're selling to mostly strategic buyers, some actually a lot of private equity firms will also ask for you to stay on for a period of time. My transition period was 90 days and I negotiated that. I was tired of the business, I wanted to move on quickly and I negotiated a 90 day transition plan. I was out if I didn't negotiate like a 24 month one that personally wouldn't have worked for me. I consider myself like an entrepreneur. I just couldn't last that long. So that's important you talk about those sorts of things. So hope this was helpful and if you have any feedback, just let me know.