When most founders start a company, we envision that one day we will sell it (or go public). But most founders have no idea how the process actually works or how hard it can be emotionally, strategically and tactically. To get the most for what you have built I am sharing some insight into the process. This is typically the largest transaction a founder will experience in their life – you can’t afford to do it incorrectly. I founded/scaled and sold my SaaS company and I have bought and sold multiple companies prior to this. While this might seem like a lot of info, it is just the tip of the iceberg.

Step 1: Planning

Target list – Create an exhaustive list of potential buyers. Start with existing partners and customers. Take a 10,000-foot view of the core value your technology provides to your customers and potential buyers.

Research – Scan the globe for companies that could benefit from the team/talent/skills and the product functionality/IP/technology that you have. Then read through annual reports, websites, news releases and blogs to find a strategy that aligns or holes in their current offering that you can fill.

Find the right contacts within the company to speak with and their contact information (Corp Dev, Strategy, CEO, CFO, CMO, Product, Engineering, Board members). Would you consider offshore buyers? There are thousands of successful and wealthy companies and individuals in other countries who are interested in buying US technology companies.

Messaging – Create a pitch deck that clearly articulates a story that resonates with the intended audience. Paint a picture of what a better world would look like for them with what you have. Address needs on their part first and then walk them through what you do and who you are. Create a call script, because you will only get one shot to create interest. Also create a messaging matrix – these messages need to be crisp, concise and relevant to your potential buyers. The first step is to create interest on their part so that they will engage in a deeper dialogue. This is critical.

Data Room – Start to assemble a data room with all of the documents that a potential buyer will need to see. This includes contracts, corporate records, employee agreements (employment, IP assignment, non-competes), financials, insurance, market information, product information, leases, and taxes. Initially, the goal is to organize the information into electronic files and identify any missing gaps. The data room is very important – get it right early to avoid pain later.

NDA – Create a suitable NDA for use with interested parties

Attorney – Be sure to have a good attorney ready before you begin. This is a critical role. They will be the primary interface with the acquirer’s attorneys and this can make or break a deal.

M&A partner – Find someone you can trust who has the credibility to help you get the right deal and to get it done. Someone who understands what it’s like to walk in your shoes.

Wealth planning – If the money to founders is life changing it is prudent to engage with knowledgeable wealth planners early in the process to ensure that the transaction results in as favorable an outcome as possible to the founder and their family.

Lowell Ricklefs – Managing Partner – www.tractionadvising.com lowell@tractionadvising.com

 

Step 2: Outreach

Finalize the deck – The deck is critical. It tells the story of who you are, what you have built and the unique value and opportunity that it represents. It is critical that you articulate this well to make it easy for the target to “get it.” You should talk about the team, the pain and the problem that you solve, the product, the technology, the IP, the market (drivers, size, fit) and your financials. I like to fine tune most decks to the needs of the target acquirer.

Finalize Outreach Messages – Most bankers prefer a single, highly-edited deck that they send to the target companies. I prefer a more refined approach that requires more work but I think is more effective at finding buyers at a higher price. Research the target companies for insight into their strategy. Read through their website, annual reports, blogs and marketing information. Modify your outreach messages and the deck to align with the desired future state (i.e. paint a picture of what the merged entities could look like). Let’s assume that your company is “Wile Coyote SaaS” and the target company “Road Runner SaaS” states in their annual report “Our software replaces email, file sharing, texting and phone calls for F500 companies.” You might be able to position your company as “Road Runner SaaS for mid-market companies.” It is a logical extension of their current business strategy for an adjacent market space (the mid-market) and expands their total market reach. Again it takes a lot more work to tailor each deck to each target but is much more effective and should result in a better fit for the buyer and the seller, more interested buyers and a higher exit value for the founders and investors.

Reach out to target companies – This is when things start to get exciting. Thus far it has been a lot of work preparing with no interaction with prospects. The key here is to be sure that the message resonates with the intended audience to create interest, which starts a discussion. The outreach will go to all of the target’s identified in Step 1. This may include existing relationships with the seller (partners, customers, investors) plus new targets identified (strategics, financial, offshore) leveraging existing relationships with your advisor/banker. Phone calls, email, LinkedIn, aggressive follow up, repeat. This is hard work and if you don’t have a sales background it will be even harder. Having a banker make these calls for you will make your company appear more legitimate from the start and they will be more likely to take the call.

Sign NDAs – NDAs are important not only to protect your confidential information but it is a good faith first step by the target companies that they are serious about the conversation. It is critical to narrow down the list of targets to those that are serious. This requires aggressive follow up with LinkedIn, email and phone.

Continue compiling due diligence information – It is important to keep assembling all due diligence information. Get everything you have organized in a way that can be shared with interested prospects (like box or Dropbox) and identify everything that is missing.

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