What does an acquisition do? Does it look like a process?
There are two types of acquisition processes: planned and opportunistic. The proposed process is where a company looks for a suitable buyer for its business, while the opportunistic process begins with a buyer.
Either way, the process starts with first building a solid list of buyers, as described in Part 1 of this series. Then, it’s a run-in with those potential creators that (hopefully) leads to letters of intent.
From there, it’s time to take proper precautions, which can last for several weeks. With some luck and a lot of effort, the deal closes and you’re in post-acquisition integration.
Speed of purchase
Even if the sale price doesn’t break records, this is an opportunity to create a successful outcome that will maximize your long-term impact.
In the prospecting process, a buyer approaches a company they want to buy.
If you decide to pursue an acquisition, you have a short window of time to continue the conversation and connect with other companies on your list of potential adopters.
In your first conversation with an active buyer, you’ll find out how much you plan to offer, as well as set a framework for the process.
You control the time in a planned process, but you have to think about a trigger event that creates a certain time-specific pressure in your business.
In random processes, a trigger event is presented by an active buyer. For venture-backed companies in the proposed process, the triggering event is often funding. You may be interesting to the companies on your list if you think they can buy you at today’s price at a higher valuation after you raise another round.
That’s when things get hectic.
Path to LOI
Regardless of how the process begins, you, your board and advisors have a few short weeks to negotiate with all interested parties. As a founder, you find potential buyers yourself or ask board members to act on your behalf.