Thread
1/ Thread: How to sell your company
Companies are (almost always) bought, not sold. This means somebody needs to *want to buy* your company.
Ideally this happens organically. But how do you, as a founder/CEO, expedite this…particularly when you KNOW you’re hitting a wall?
Companies are (almost always) bought, not sold. This means somebody needs to *want to buy* your company.
Ideally this happens organically. But how do you, as a founder/CEO, expedite this…particularly when you KNOW you’re hitting a wall?
2/ “Planting an idea”
www.youtube.com/watch?v=xilrCsvkgeo
Inception is one of the greatest movies of all time (watch the clip). The whole premise is about implanting an idea in somebody’s mind…the inception of an idea.
“If you're going to perform inception, you need imagination”
www.youtube.com/watch?v=xilrCsvkgeo
Inception is one of the greatest movies of all time (watch the clip). The whole premise is about implanting an idea in somebody’s mind…the inception of an idea.
“If you're going to perform inception, you need imagination”
3/ There are probably three types of acquisitions:
A. Acquihire (want team, not business or product)
B. Product/“Trade Sale” (want product or to repurpose product, acquirer has distribution)
C. Business “left-alone” (give existing business more resources to grow faster)
A. Acquihire (want team, not business or product)
B. Product/“Trade Sale” (want product or to repurpose product, acquirer has distribution)
C. Business “left-alone” (give existing business more resources to grow faster)
4/ Especially for Acquihires and Product-oriented sales, you need to get to know your prospective “buyers” *far in advance* of “needing” or wanting to sell your company. Two independent variables exist: when they can/want to buy, and when you want to sell…rarely do they align!
5/ Buyers aren’t companies, they’re *people at companies*, and generally people with P&L responsibility. Often somebody climbing the corporate ladder who wants to make a big splash and is anxious to ship something taking way too long internally. Or a new VP who needs a team ASAP.
6/ Almost every large company has a corporate development person/team. Their job is to close deals, not to ideate - once you are “bought” you’re not working for the VP of Corp Dev. You’re working for whatever division and whatever person wanted your product. Focus on GMs/PMs/VPs.
7/ Focusing on product/trade-sales: the key thing is to figure out where 1+1=3, or how your product might fit within the org. At TrialPay we showed ads around transactions — what if PayPal could stick our ads in every purchase receipt? Would generate >$1B…that was our pitch.
8/ The goal is not to approach the company (or person) with “please buy me” — it’s not like a fundraise. That’s massively counterproductive. It’s to propose a BD deal that is just standard operating procedure for your independent company. Which hopefully happens regardless!
9/ You CANNOT PUSH A STRING. This was a lesson I learned very painfully. Do not be aggressive; this isn’t like closing an oversubscribed funding round. Articulate a vision for how your product fits and is a win-win for both, try to get a test/integration/contract in place.
10/ The true “inception” for the more valuable product-oriented acquisitions is “wow, we shouldn’t let this be a BD-deal…we NEED to own this.” *That* is when you can (possibly) sell your company for a lot of money.
11/ Even so — most companies have a culture of “anyone can say no, nobody can say yes” — you need to sell horizontally, deal with people who are threatened (“we can build it ourselves!”), and recognize you’ll be judged “on the present”: www.arampell.org/2015/04/21/being-judged-on-the-present/
12/ “Being Judged on the Present” is a very big deal (see blog post) — you need to steer things to what your product, or a variant of it, WILL look like. Make a real polished demo. Put real work into it. Your “existing” product or team or tech might be used against you.
13/ This is why “imagination” is so key — your product currently does X, but there are probably 5 giant companies where a few tweaks/changes to it - X’ - could accomplish a major objective for them…how you pitch each might be a little different.
14/ I can’t overstate the fact that relationships matter. You can’t start this process with 3 months of cash. You should be thinking about this even if you plan to conquer the world — get to know key decision makers/GMs at every potential acquirer because…you never know.
15/ And again, my approach wasn’t “I want them to buy me.” It genuinely was “I want this *commercial* deal with this company, because it will be transformative for MY business.” Which was 100% true.
16/ There’s also the reality that sometimes your current “business” scale makes your “product” less appetizing (what does the acquirer do with all the people/processes if they want to repurpose?). This is the hardest part: do you change your business to make it more palatable?
17/ GENERALLY, the answer is NO. Most M&A fails. Again, when you want to sell usually does not align with when they want to buy. But if you really NEED to sell, it’s useful to think through the “anchors” holding you back:
18/ “Running a process” to sell a company rarely works if selling team or product, especially when product needs to be repurposed…but if you are already being hotly pursued, then and only then (IMHO) does it make sense to “shop” — “Boy who cried wolf” syndrome is real
19/ Because again, “when they want to buy” is a real thing — maybe they just bought a giant company and don’t have the budget/fortitude to buy another one. Maybe they whiffed their last quarter’s earnings. Don’t push a string. Hurts your chances when they’re ready to buy.
20/ Sometimes you can help expedite, though: once you already have the relationships, and ideally some product integration in place, you can, say, start a fundraise and ask if they’d like to invest (might make acquisition more expensive down the road, maybe they should buy now!)
21/ In the absence of competition, though, it’s very hard to speed up an in-flight M&A conversation/process. And it WILL suck up most of your time and energy…and distract every member of the team working on it. Limit the circle of knowledge on this — it’s crucial.
22/ “Raise money when you don’t need it” is the normal advice for fundraising. For M&A, I would strongly encourage everyone: “Build relationships and think about this…when you don’t need to sell.” Because one day…you might want to or need to.
23/ And again, this doesn’t mean CEOs should spend most of their time on this. I think ideally it’s 5-10% just focused on capital raising/relationships (inclusive of prospective M&A) as a background process.
24/ Lastly, if you want a good price — much less likely when your growth has stalled. The best (luckiest?) deals I’ve seen done are when the CEO (recognizing an upcoming speedbump) basically “expedites” interest…and when the “wants to sell” and “wants to buy” variables meet :)
