What does an an acquisition process look like?
There are two kinds of acquisition processes: planned and opportunistic. A planned process is where a company looks for a suitable buyer for their business, whereas an opportunistic process is initiated by a buyer.
In either case, the process begins with first building a strong list of potential acquirers, as covered in Part 1 of this series. Then, it’s a sprint with those potential acquirers that (hopefully) results in Letters of Intent.
From there, it’s time for due diligence, which can last several weeks. With some luck and a lot of hard work, the deal will close and you’re on to post-acquisition integration.
The shopping sprint
Even if the sale price isn’t going to break records, this is an opportunity to create a successful outcome that will maximize your long-term impact.
In an opportunistic process, an acquirer approaches a company it wants to buy.
If you've been approached and decide to pursue an acquisition, you have a short time frame to continue that conversation and reach out to other companies on your potential acquirers list.
In your initial conversations with the active buyer, you can expect to learn how much they intend to offer, as well as set up a framework for the process.
In a planned process, you control the timing, but you have to think about a triggering event at your business that creates some time-bound pressure.
In opportunistic processes, the triggering event is being approached by an active buyer. For venture-backed companies in a planned process, the triggering event is often a funding round. You might become interesting to the companies on your list if they think they can acquire you at today’s valuation versus at a higher valuation after you’ve raised another round.
That's when things get hectic.
The road to an LOI
Regardless of how the process started, you, your board and advisers have a few short weeks to negotiate with all interested parties. As a founder, you’ll either reach out to potential buyers yourself or will ask board members to do so on your behalf.