The Hidden Pitfalls in Acquisitions [Webinar Replay]

All right, what's up everybody? Super excited for this webinar. We'll go ahead and get started in just a bit. This is some really good content. We do a lot of acquisitions at acquire.com, and every acquisition is a different journey. There's different issues that come up, there's different pitfalls that happen, and a big job that we like to pride ourselves on is helping founders avoid these pitfalls. So we're going to be talking a lot about those. So this is the hidden pitfalls in acquisitions, how buyers evaluate risk, execution, and valuation, and how we help. As a quick agenda, I'm going to be going over how Acquire helps founders win. So every single day at acquire.com, we're helping founders sell their companies. We're helping them prepare their businesses. We're helping educate them on the process. We're helping market the opportunity to the hundreds of thousands of buyers we have on acquire.com. And we do all this to make successful founders. So I'll go over that in a little more detail. And then we'll dive into the hidden pitfalls. So these are some stories I'm going to share about acquisitions that we've helped facilitate, where some things came up and we were able to get around those pitfalls. And they're great lessons in case you're looking to sell your company. You can hopefully avoid those pitfalls. Then I'll be going over our buyers. So we work with our buyers on a daily basis and we know a lot about them from the types of valuations and multiples they look to pay for businesses their non-negotiables, the transparent truth on how they access deals. So we'll give you some insight into how you can put yourself in the buyer's shoes to make you successful when you're going to sell your business. And then also talk about how we help. We create a lot of content at acquire.com. We have free resources available for founders that can be accessible any time of the day from our podcast to our YouTube channel to our blog. We even have a course on how acquisitions work. And then I'll also talk about a free listing scorecard that we're doing for any founders on the call that's looking to potentially sell your business. And it's a great way to see if you're potentially ready to sell your business and what to think about before you go to market. And then at the end, I'll do some live Q&A. So if you have any questions, feel free to hold those as well. And a quick introduction of myself. My name is Andrew Gazdecki. I am the CEO and founder of acquire.com. And I started Acquire after selling a company myself. Prior to this, it was a SaaS business. I bootstrapped it to about $10 million in annual recurring revenue. And just going through that process, I found it really confusing. It was really difficult to get ahold of buyers. The whole end-to-end process of selling a company was really opaque. It felt like everything was behind— really empowered founders and educated them on the acquisition process so they can have a better shot at selling their company. So if you're not familiar with Acquire, we are the world's most friendly startup acquisition marketplace. And what we do is we help thousands of founders get acquired. We've helped about 2,000 founders get acquired since I started the company about 5 years ago. And we really do this to change lives. I think it's incredibly rewarding to work with founders on a daily basis. And really talk about what's next for them, help them cash in their hard work and get onto the next step of whatever's next for them. And a little more about Acquire. Again, we've been in business about 5 years. We've done over 5,000 total deals, over $1 billion in closed transactions, over 500,000 registered buyers. And today on the marketplace, we have over 2,000 listings. So a lot of activity on the marketplace on both the sell side and the buy side. Every single day, these numbers are growing and we've served over 100+ different countries. And then in terms of last year, last year was our best year in business so far. We closed about 500+ transactions, over $100 million in transaction volume, and we currently have over 100 deals under offer. And I think the big takeaway of this slide is it's a great time to sell your company. I, I think a lot of founders that I talk to that look to sell in, say, 2021 may have regretted not selling because the market was looking really good, and then it turned in 2022 and 2023. And I think we're in a similar period now where multiples are looking great. There's a lot of activity on the buy side. We're seeing more interest companies looking to sell than ever before. And so really good time to potentially consider selling. And we definitely are seeing the activity and the numbers we like to see to confirm that. So now I'm going to be going over some pitfalls and outcomes, and these are real transactions we've done at Acquire. We see pitfalls all the time, and because of the M&A team that we have at Acquire, we're able to help founders navigate these. And for the first pitfall, we're having an example prioritizing price over certainty. So this was— it was profitable and they were looking to sell for $1.5 million. And essentially what happened was there were multiple offers on this business, and one offer was contingent on SBA financing and the other was all cash at close. And in these scenarios, it can be difficult to decide which offer to take. And in this example, the SBA offer was actually higher than the all-cash offer. And what we did is we worked with the founder to understand the risks of each offer, and our view was that the SBA finance offer would have potentially a lower chance of closing given that there was bank financing involved. And so we recommend going with the all-cash buyer that we had previously worked with to help them have a successful close. And this can be really important because when you optimize for the top-line number in acquisitions, you may be overlooking certain details when I think the biggest thing you want to accomplish is having a deal successfully get over the finish line and understanding the risks involved when financing is involved or an inexperienced buyer. Prioritizing a buyer that might be all cash or more experienced. That can lead to a successful acquisition rather than a deal that falls through. Pitfall number 2, letting your guard down too early. I think a lot of founders I work with, they think when they sign the LOI, that is a time to celebrate, and that really couldn't be further from the truth. You really want to just continue pressing and pushing the deal forward until the money is literally in your bank account because the deal could fall apart at literally any moment. And in this example, this was an agency that sold for $3.8 million. This was an awesome transaction that our M&A advisory team helped facilitate, and it had its definite fair shares of ups and downs. Essentially what happened was there was a retrade late in the process due to lender-specific concerns unrelated to the business. And this can happen. It can be an issue that comes up that really isn't material, and it turns into something that causes the deal to derail. And what we did is we actually refined the positioning. We went back to market,, and we found another buyer that also had SBA financing secured and was able to close at the previous valuation. And the lesson here is, again, it's never over until it's over. And this is where having a great M&A advisory team in your corner can make all the difference because these are stressful moments where you could potentially take the retrade, a lower sale price, you could give up on the acquisition altogether. And this is where having an experienced team in your corner can help pick you up and help reengage buyers that may have been previously interested. Pitfall number 3, cutting price under pressure. This was a SaaS business and it was acquired for $4.5 million. Again, another life-changing acquisition. And this was a SaaS business without traditional recurring revenue. They found a strategic buyer with strong product fit. Late negotiations, the buyer pushed aggressive risk allocation and requested a last-minute retrade. How we helped, we helped valuation, constant and addressed risk through structure, transition support, and post-close involvement instead of just price. Outcome closed at the original valuation with minor structural adjustments. I specifically remember this transaction. Again, another high-stakes acquisition where in these scenarios it can be really easy to just take the lower offer, do it to get the deal done because you don't want the deal to fall apart. But if you know the value of what you built and the value of your business to the acquiring party, that allows you to hold firm, address what really the concern is. And ideally close at the agreed valuation rather than a lower valuation. And this can be the difference between hundreds of thousands or even millions of dollars. Pitfall number 4, killing competition too soon. This was another SaaS business. The acquisition price was over $2 million. This was an AI automation platform for browser and app workflows, and they had multiple different offers early in the process, and the founder felt that he had found the best fit. And so he moved and signed an LOI with a buyer fairly early, and then late in the process, the buyer stalled over a late SOC 2 compliance requirement that had not surfaced earlier. And because of this, we felt that the deal was on shaky ground, so we ended up canceling that LOI and going back to market to reengage other buyers. And the big lesson here is always keeping buyers that have previously expressed interest in the loop on the acquisition. So if you do move forward with an LOI, always let other interested buyers know that you were moving forward with another buyer, and if anything happens, you'll definitely reengage them. And that's what we were able to do. We were able to go back to market, reposition the business, and we saw multiple new offers come back in, and the seller chose the buyer with the best mix of speed, certainty, and price and closed on schedule. Again, this is another example of just not counting your eggs before the chickens hatch or whatever the saying is, because so many different things can happen post-LOI. And in this one, the exclusivity, excuse me, potentially hindered the deal and the founder from speaking with other buyers. But again, keeping the other buyers in the loop is what made all the difference. Pitfall number 5, ignoring the final mile details. This was another SaaS business they were looking to sell for $10 million. This is one of the larger transactions we did at Acquire. And I think a good thing to point out too is we do facilitate transactions of this size. We do work with a number of strategic buyers and private equity firms. And in this example, basically right before closing, the finance team on the buy side had a late-stage working capital disagreement. And what we were able to do is we had our CFO from our company meet with the finance team on the buy side and find a mutually agreeable solution. And in these scenarios, I know a lot of founders, they aren't finance experts. I'm not either. And because they had our team in the corner, they were able to bridge the gap and successfully closed, leading to a life-changing outcome. And I think the biggest learning here is in acquisitions, every small detail can become a huge detail. And so to always have your guard up and have a team in your corner that can help you navigate these issues. Okay, so I'm going to go over our buyer network. So who buys on acquire.com? Who is doing these acquisitions? What do they look like and what can you learn from them? So we have a number of different buyer groups, everything from investment groups, experienced operators, private equity firms, family offices, public companies. And then we also see a large amount of our transactions coming from high net worth individuals, entrepreneurs, corporate entrepreneurs. So think maybe a VP of sales at a tech company or VP of marketing at a public company that's looking to acquire a business and step in as the CEO. And this allows us to work with just so many different buyers and have a huge network to field multiple different offers from, whether that's from a private equity firm or a strategic buyer or a high net worth individual. This gives us a lot of flexibility and allows us to get a lot of different transactions done. And when it comes to having this many buyers, it's absolutely critical to win their attention. And one thing I love to point out is a typical PE buyer is managing up to 100 startup opportunities per day. And when you're evaluating hundreds of different deals per day and per week, you need to really make sure that you're standing out to these individuals. And what this means is you're competing for attention with these buyers, and if you're not prepared or materials aren't complete, buyers are typically going to move past quickly. So this is why we're always trying to educate founders on the importance of preparation and working with our founders to make sure that they have everything that is essentially required by our buyers to really evaluate the startup acquisition opportunity. How buyers evaluate and buy. So right at the top, there's a number of reasons why buyers acquire businesses rather than start them from scratch. Uh, but right at the top would be more control, so easier to influence outcomes. Two, you can start at one, not zero. Three, buy product-market fit and allows them to move faster. Uh, four would be maybe the business has superstar talent and they'd like to work with scalability already built in. 5 would be capitalize on momentum, profits from day 1. Essentially, buyers are not experienced in the 0 to 1 phase of building a company. They're not interested in figuring out what the product should be, how they should acquire the first customers, what should the brand look like. They're more interested in scaling the business. Maybe the business is at $100,000 or $200,000 or a couple million in revenue. They want to 10x that from there by what's already working within the business. And so that's why when buyers evaluate, they're really looking for indication of attraction, whether that's financial traction or product usage, because they're essentially looking to capitalize on the momentum of what the founder of the business has already accomplished. How they interpret metrics. So aside from revenue profitability, buyers are always going to be looking at revenue consistency, churn retention patterns, gross margin, owner workload, customer concentration, growth direction, all of this to get a good view into the health of the business. And a lot of these May seem kind of detailed, and there's a reason for that. There's a lot of money at stake in acquisitions, and a big part of what we do at Acquire is we help founders prepare to have buyers assess their business. We'll even do things such as recasting a founder's financials to show the true profit of the business and really making sure that founders are prepared when buyers go to evaluate their business. But these are just some of the metrics, and having these available handy so buyers can quickly review them Makes all the difference. Now we're going to talk about valuations. This is probably the number one reason I see founders not selling on acquire.com. Generally, what I see in unsuccessful situations is when a founder will list their business at too high of a valuation. Typically, this is going to stem from a revenue multiple. What we've seen in the past few years is really profitability being king, and almost all of the transactions that we're facilitating are based on a profitability multiple and not on a revenue multiple. In 2021, we saw revenue multiples But today, profit multiples is generally all the transactions that we see actually closing. And when you price too high in a market, when you have thousands of other businesses looking to sell right next to you, you lose buyer attention, and it just diminishes your chances of successfully being acquired. So why is this important? Pricing outside of how the market speaks decreases your odds of acquisition success dramatically. I would say it takes it down by probably 90%, if not more. Uh, so definitely really think about how you're going to position the business in terms of valuation, uh, because you really want to maximize that first impression with buyers. And in terms of what we see for multiples, we just recently released a multiples report using all the data of closed transactions for all of 2025. But from here you can see some ranges that are good rule of thumb. Profit multiple being 2 to 9x if you're under $100,000 in TTM profit. If you're between $100,000 and $1 million, that would be between 3 to 7 times. And then over $1 million would be 4 to 8x. And you can see as the businesses get bigger, the multiple scales with it because the business is generally viewed as being more stable and you're going to attract a different buyer pool who can pay higher multiples. So here's the million-dollar question: how to justify a higher multiple? What holds weight? All of this stuff combined is always going to drive your multiple higher. Everything from high profit margin, high year-over-year growth, low churn, large TAM, high product use, multiple years in business, strategic partnerships. And a dominant brand. But the biggest one is really going to be high year-over-year growth. If you're looking to command a revenue multiple, you generally need to be at scale, which generally means over $5 to $10 million in recurring revenue and year-over-year growth being at least 30%, ideally 100%. If you're not in these categories, look to value your business on a profit multiple and you'll be much more successful when you go to market. Common issues we help sellers fix. So a lot of people don't know this, but at Acquire we are helping founders literally every single day because Acquisitions are extremely confusing. If you go at it alone, generally you're going to hit some roadblocks. You're generally not going to be as prepared as maybe some other businesses that are more experienced in acquisitions. And we love to help founders with these issues, such as confusing revenue explanations, missing or inconsistent financials, weak operational descriptions, vague workload expectations, poor transition planning. A lot of things founders may not think about when they go to market or think that are important for buyers to see. For example, the one at the bottom is a great one to add. Have you thought through the transition? Are you willing to stay on in the business? If so, how many hours per week or per month are you willing to provide? A lot of these things to really de-risk acquisition in a buyer's eyes, which dramatically increases the odds of a successful close. Why Acquire's curated listings win. At Acquire, we are a curated marketplace. We curate every single listing that comes onto the marketplace. Uh, we believe that quality listings lead to quality outcomes. We're not here to just list every business that we think could go on the marketplace. We're here to help founders successfully get acquired. And by doing this, sellers come in more prepared, documentation is clear, deals move faster, there's fewer unknowns, and most importantly, this leads to higher buyer trust. When buyers work with us, they know they can trust the businesses that we vetted, and these are real acquisition opportunities, and there's a level of seriousness, that's necessary to successfully close transactions. And to give you a better picture into how much we curate our marketplace, we generally only approve about 15% of the businesses that are submitted to us. So that means out of 10 submissions, we're only going to be approving 1.5. So 2 out of 10 are approved on acquire.com. And for those that we don't let onto the marketplace, what we do is we give them reasons, we'll help prepare them to go into the marketplace, we'll help improve their documentation, everything that we believe leads to successful transactions based on the thousands of founders we've helped get acquired. Now I'm going to talk about how Acquire helps founders win. We've been doing this for about 5 years. Again, we've seen every scenario you could possibly see in acquisitions, and we absolutely love helping founders through really one of the hardest processes you can go through. And we like to make it super easy and super smooth. And we have two parts to our business. We have our GBA advisory. GBA stands for Guided by Acquire. This is our hands-on M&A advisory service that has some of the best people in the business. And this is generally for SaaS and agency businesses only with at least $100,000 in recurring revenue or TTM revenue and definitely profitable as well. And if you don't fit into that category, we have the general marketplace, which is curated. This is a self-serve marketplace for experienced sellers, any business type and all prices. And a little more about Guided Acquire. We essentially partner with you as a founder to make you successful in selling your business. We do everything from helping attract buyers. We'll optimize your listing. We'll get you featured in all of our newsletters. We'll attract hundreds of thousands of buyers to see your opportunity. We'll personally reach out to strategic buyers as well on your behalf. This is generally something that I personally do from my inbox. We'll help you secure the best offer, which includes fielding offers. We'll help other buyers be notified when you receive LOIs. We'll help you understand which terms are good and which terms are not. We help put together a deal schedule, which can help increase urgency. And then once you select a winning buyer, we'll help with due diligence, we'll help with legal review, and then the escrow fee is on us. Essentially, we help find buyers, we help you secure the best offer, and then most importantly, we help make sure the offer closes. There's so much that can go wrong in due diligence or pitfalls that pop up or unexpected things. What we're really experienced at doing is making sure that deals close successfully because that's the whole point of going through this whole process. And then in terms of the marketplace, we are firm believers in having exceptional customer support. We have 24/7 chat support, email support. We also have a help desk and template center and a resource center where you can get all the answers you might have, or excuse me, all the questions you might have answered on acquisitions, how our process works, recordings to previous webinars or previous recordings of podcasts. Definitely out our resource center if you're interested in acquisitions. And then a little bit more about seller success resources. We create a lot of content at Acquire because we believe that acquisitions shouldn't be kept behind closed gates, where founders should be educated on the process to allow them to prepare in advance, to really think about what the next steps look like. So we have content on our YouTube channel from our previous webinars, our success stories, tons of different tips on acquisition stories or pitfalls or things that you should be doing when you're thinking about getting acquired. On our blog, we have webinar recaps, more success stories, help and advice, every acquisition terminology we've written about it, news within the industry. So if you're looking to sell your business, check out these two resources. They're completely free. YouTube channel, our blog. There's definitely— we pretty much have written the book on acquisitions. And then we're trusted by founders around the world. We have hundreds of Trustpilot reviews. As I've said, we've helped thousands of founders get acquired. And this is really what drives us. We love helping founders succeed. Now, if you're interested in selling your business and potentially working with us, we'd be happy to give you a free listing scorecard. This is where we essentially give you a score on how prepared we feel you are to sell your business and gives you a lot of actionable tips to get ready. And this could be the difference between selling your business and not selling your business. And if you're interested in this, go to acquire.com, scroll down to the footer and click Meet the Team. We'd be happy to learn more about your business and send that over. And at the end of this webinar, you should receive a poll. If you're interested, just go ahead and raise your hand for that and we'll send that over. And then lastly, we've been working on a ton of new stuff at Acquire. We're always looking to improve the company. We're always looking to help founders succeed. And if you're not looking to sell your company, you're not ready, we built a new tool called Metricable. It's completely free and it essentially helps you understand your metrics, gives you a free valuation of what you could sell for whenever you're ready, which adjusts as you grow. So as you grow revenue and monthly recurring revenue, your valuation grows with that, helps you understand your customer lifetime value and everything else in between. So check out Metricable if you haven't already. And with that, thank you everybody. I appreciate you attending this webinar. And at this point, I'm happy to answer any questions about acquisitions or the webinar. Really appreciate it. Okay, I'll go through a few questions here, and if you have some, feel free to put them in the chat and we'll, we'll see if we can get those answered. Okay, here's a good one. How should I think about choosing between a higher offer and a faster close? I think this one, when you think about a higher offer compared to a faster close, it's really going to be up to your priorities as a founder and an entrepreneur. If you go with a higher offer, there could be risk involved with maybe there's financing included, maybe there's an inexperienced buyer, maybe there's an earnout. And if you're just looking for a fast close, all cash at close, that could be something to weigh. The way I think about it though is I'd almost always go with the all cash at close, the faster close as well, Working with the more experienced buyer, because it's really hard when you go through a process and you get into due diligence, you sign the LOI, you're getting super excited, and the deal falls through. So even if the valuation is, say, 10%, 20% less with another buyer, but the probability of close is much higher, I would absolutely go with that. Okay. "How do I evaluate whether a buyer will actually close?" Okay. So at Acquire, we do a number of things to help with this. Number one is going to be proof of funds. You can require buyers to verify their funds with us. We verified over about $5 billion in total on the platform. You can talk about past acquisitions. You can talk about their lender relationship. You can see if they have any references that you can check. A lot of times for a lot of the buyers that acquire, when you're working with us as— when you're working with us and we're your M&A advisors, we've worked with a lot of these buyers. So we know their reputation. We know their deal history. We're also happy to speak with them on your behalf. Okay. Isn't all cash offer always better than SBA? I mean, not always. I think SBA offers can be awesome. I think a lot of offers, including SBA, can be great offers. I think it's just important to be aware of the timeline increase when you enter those offers. Sometimes all the offers are going to be SBA financed and you're not going to necessarily have an option but to choose one. But no, we see a ton of SBA offers close and they're fantastic opportunities. But all cash generally will close faster. So depending on how quickly you'd like to close and how important that is to you, all cash could be better. Okay. What's the most common reason deals fall apart? Okay. That's— we definitely see a lot. Sometimes it's lender related. Sometimes it's due diligence surprises. Surprises always tend to kill deals. Unrealistic expectations. That's generally a big one. I I think if you work with us and we're aware of any sort of issues within the business, there's no surprises and there's realistic expectations involved set for both sides. I think deals have a much higher chance of closing. If my deal falls through, is my leverage gone? Absolutely not. We actually see this quite commonly where a founder will sign an LOI, they'll go back to market, and they'll wonder if there's still going to be interest. And generally, there's always a ton of interest for the business if it's a high-quality opportunity. And sometimes that happens. You sign a letter of intent, you enter exclusivity, something happens with that buyer, and you have to go back to market to sell the business. We're experts in these scenarios. We've done it more times than I can count. We know how to reposition the business, take the feedback that you've heard from the market. And sometimes it can really be a blessing in disguise, meaning you just got a bunch of feedback from the market. They just told you all the stuff about your business that they loved, but also they didn't love after all the buyer calls. And so when you go back out to market, you're able to apply that feedback, address all concerns that you had previously. And sometimes that leads even to higher offers and more offers. And that's really our goal at Acquire is to get multiple offer scenarios in place. So sometimes I've seen it actually be a blessing in disguise. So no, your leverage is not gone. Okay. I'll go with 2 more questions and then we'll call it here. How do I respond if a buyer retrades late in the process? So in these scenarios, I think it really depends on what they're retrading, meaning are they asking for a steep, steep discount without Really anything material that appeared in the business or the process. If it's a situation like that, you'll absolutely want to hold firm. If there's something regarding working capital or maybe a timeline change, something more reasonable, I think those are scenarios where you want to negotiate with the buyer or at least communicate your concerns. Not all retrades are the end of the world. We've seen some very reasonable ones, but it's the unreasonable ones where you want to hold firm. And I think this The important part here is this is where it becomes extremely important to know just how valuable your business is to the acquiring party. If it's a strategic acquisition or a private equity firm, how interested are they in the deal and how worried are they about potentially losing the deal? And if you've done your job during the process and you've kept other buyers in the loop and they're aware that there's potential backup buyers if something happens with this specific deal, That gives you more leverage, especially if you're late into the process. Okay, last one. What are alternatives to lowering price? That's a good question. There's a lot of things. You can offer additional transition support. You can say you're open to working in the business for an additional period of time. You can be open to an earnout. You can be open to use seller financing. Those are going to be the big ones. And a lot of times when acquisitions don't close or there's no offer in place and a founder that we're working with is thinking, Well, let's lower the price. Really, the perceived risk on the acquisition is just too high. And so if they're able to bridge that gap by being more available post-close, or they're willing to prove that the business will be in great shape once the deal closes with an earnout or seller financing, that can bridge the gap. So being open to creative deal structures, providing more transition support to make the acquisition successful, all of those things add up. Okay. One last question. What do investment groups and experienced operators look at that premium buyers don't, or do they relatively at the same stuff? That's a good question. They generally will all look at similar items such as revenue, churn, profitability of the business. Usually the difference that we see is the size of business. For example, private equity groups are going to be looking at businesses that are, say, over a million in revenue and hundreds of thousands in profit. On the small end, ideally millions in profit. And then experienced operators are going to be looking at much smaller opportunities because the capital that they're going to have on hand is generally less. So this could be anything from a business that's doing a couple thousand per month or tens of thousands per month. They're able to acquire those businesses that are just too small for more traditional investment groups. All right, everybody, thanks so much for joining. I hope you enjoyed this. It's always a pleasure presenting these webinars to you all. And if you have any additional questions, we're here to help at Acquire. Feel free to reach out, and I hope you all have a great rest of your day.