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Mergers & Acquisitions

Should you build a startup expecting to be acquired by a specific company?

My startup’s tech is applicable to a few companies, but my eye is on Yellow Pages. Is it good or bad practice to tailor tech for a future acquisition?

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David Favor

Fractional CTO

Always best to do business design with multiple exits strategies.

So one strategy will be to liquidate/sell your company to another person or entity.

And... Be sure you design in cash flow from day one.

Many businesses are fake. There's no monetization scheme. The company theme song is "Money for Nothing".

Design in monetization from day one + you can hold or sell as you please. No pressure to do either.

Answered over 7 years ago

Ariovaldo Silva

Brazilian Management Consultant

You should manage your Business in order to become it very attractive for acquiring companies and also to add the maximum value in your company business value.
Acquiring companies will make a deep analysis about your company capacity to generate cash,about quality of finance statements and potential offensive and defensive sinergies.
Offensive sinergies come from your products and market, defensive come from structure to be saved for acquiring companies.
Anyway, independently of selling or not your business to manage it in order to obtain maximum value in a future transaction is an intelligent strategy
I can give you several other tips that I have lived for more than 40 years working at international groups and now applying knowledge to business like yours.
Regards and Success ( Ariovaldo )

Answered over 7 years ago

Joshua Blank

Sales Manager and Entrepreneur

I would highly caution against taking this strategy.

First, if you are considering an exit strategy it's important to understand what your motives are behind selling. Are you simply looking to sell to the highest bidder? Would you like to stay on with the company you sell to? Do you think you could go back to working for someone else?

If you're selling for money alone, often times the highest bidder is someone you wouldn't expect. Companies who are in certain markets tend to see the majority of the deal flow (acquisition targets) because the sellers both intermediaries and company owners approach these buyers first. Companies are constantly looking to expand into adjacent industries and will pay a premium to do so.

An example of this would be a starter log company acquiring a chocolate chip cookie brand or Accenture acquiring marketing firms.

If you have other considerations besides price, you won't know until you have ownership meetings and get a better sense of whether your goals are compatible with theirs.

To echo the sentiments of the previous answers, focus on creating value and also stay on top of the m&a trends in your industry to gauge the valuations and where they seem to be trending.

Answered over 7 years ago