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How to prepare for an acquisition

From the moment you start a company, you need to think about how you plan to exit it

By Anisah Osman Britton

Timothy Armoo

From the moment a founder takes their first investment, they need to be thinking about how they’re going to return money to their investors and what they personally want from an exit — money, time, influence, etc. One way to exit is to get acquired.

Timothy Armoo sold his influencer business Fanbytes to global digital marketing agency Brainlabs for an undisclosed eight-figure sum. Anisah Osman Britton will be interviewing him onstage about scaling and selling his company at the Sifted Summit in October. As a warm-up act, she spoke to him about his top tips for getting ready to be acquired.

This Q&A first appeared in the Sifted Startup Life newsletter, which comes out weekly on Wednesdays. Throughout September, it will tackle the tricky subject of M&As. Sign up here to catch the latest. 

Spend time dating potential partners

An acquisition is like a marriage. You’re merging two companies, cultures and sets of people together, so you want it to be the right fit. Start “dating” partners while you’re still building the company. A CEO needs to spend at least 20% of their time networking — and that includes building strong strategic partnerships with potential buyers (which are normally bigger companies).

If you plan to sell a company for sub-€10m, you can be relatively informal about how you build relationships — reach out to the founders of companies you think would be a good fit. Or, if a potential buyer is a company known for buying up companies, it may have a corporate development team you can reach out to which will be looking for interesting companies.

Have a rough idea of your terms

If the conversation of buying your company comes up with a potential partner, you want to have a rough idea of what you and the company would want from the deal. Firstly, find out how much your company is worth. Speak to a merger and acquisition (M&A) bank — you’ll be able to see how it values companies in your industry. This is the beginning of an acquisition process, so it’s good practice for later down the line.

When you understand how company valuations work, you can optimise your startup’s strategy for building things that drive value for potential buyers.

Figure out what you want

People get obsessed with wanting a billion-dollar exit but most people won’t get that — nor will it just land in their lap. A significant exit can dramatically change your life — it’s not just about becoming wealthy but the options it gives you around your lifestyle, the people you can hire, the investors you get to choose and the work you want to do.

Create an acquisition strategy

This comes a bit later down the line when conversations are getting more serious but it’s good to think about it early so you can get everything in order. It can be created by the team or, if you’re a larger company, by an M&A bank. Focus on getting your finances in order, getting stuff audited, having a strong management team and, importantly, organising your data room — this is where you store all the information concerning your company, from legal to finance, contracts and people-related information.

Plan it as if it were a sales job

It’s the biggest sales job of your life. You want your best senior sales person on the job full time for the acquisition negotiation period. This is normally the CEO. It needs to be framed as just another sales job — just with a few more zeros on the end.

Preparing for an acquisition

💰 Five lessons for getting acquired. Founders should be realistic with themselves; the odds of building a billion-dollar business are low.

💸 Dealing with difficult negotiations. You have to manage expectations with all involved parties — it can be a shitshow.

🤔 The problem with acquisitions. Corporates relying on acquisitions for their innovation may be detrimental to startups.

👌 Is it the time of microacquisitions? More and more small SaaS companies are being bought quickly — and for meaningful sums of money.

🔮 What’s it like being acquired? 12 lessons from a founder a year after their company was acquired.