How to Get Acquired: Your Step-by-Step Road Map to a Successful Exit

Knowing how to get acquired can make all the difference when it comes to successfully selling your business. With careful preparation and planning, you can set yourself up to sell your company for a higher price and win more favorable deal terms than you may have otherwise. The work you put in now to create a successful exit will pay financial and personal dividends for years to come. 

In this article, we discuss:

• What happens when a company is acquired
• How to build an acquisition-ready company
• Preparing your company for an acquisition
• Stages of an acquisition

“With careful preparation and planning, you can set yourself up to sell your company for a higher price and win more favorable deal terms than you may have otherwise.”

What Happens When a Company Is Acquired

If you are thinking about selling a business, it is important to know what that actually entails. When a company is acquired, the ownership of the business and all agreed-upon assets transfer to the new owner. 

The new owner or owners could be an individual, a competing company, an investment group, venture capitalists, or many other kinds of entities. Likewise, they could acquire a company for a range of reasons, from purely financial to strategic or operational. 

There are many steps to the acquisition process. We will review these steps in more detail later on in this article.

How to Build an Acquisition-Ready Company

As mentioned above, understanding how to get acquired and achieving a successful exit doesn’t happen automatically. Regardless of your business model, it is important to start building an acquisition strategy now. That way, you will be prepared to make an exit when the timing is right. 

There are several key components that make a company attractive to prospective buyers. Collectively, these qualities are the Four Pillars of Value. They include:

• Growth
• Risk
• Transferability
• Documentation

Growth

Regardless of whether you run a small or a large business, one of the best indicators of a company’s overall health is its past and present growth trends. Steady and strong growth indicates a company will likely continue to grow in the future. Weak or inconsistent growth may signal issues with the business. 

Prospective buyers will also pay attention to any opportunity within the company that is ready for future growth. If they see they could make some small changes to drive growth, such as creating additional marketing channels or realizing new revenue opportunities from your established customer base, they will be intrigued. 

Lastly, any serious buyer will be looking at the expected future trends of your business’s market as a whole. Is it in decline? Is strong growth expected? The answers to these questions will have an impact on how many interested buyers you attract and the ultimate price they are willing to pay for the company. 

“Regardless of whether you run a small or a large business, one of the best indicators of a company’s overall health is its past and present growth trends.”

Risk

When selling a business, it is important to be aware of the relative risk your company entails. The riskier it is, the less attractive it will be to a potential buyer. Any steps you can take to minimize risk in your business will serve to increase your company’s value and prepare it for a successful acquisition.

In general, any area of your business operations that relies on a single point of failure incurs risk. For example, if you run an Amazon business that only has one successful product, potential buyers will see that as a risk. Prior to selling, go through your business operations and address any aspects that entail risk. 

Transferability

Your company is only attractive to a buyer if it can successfully transfer to their ownership without negatively impacting its performance. If you run a disorganized operation that relies on your personal knowledge to smooth over any wrinkles, it will likely drive away interested parties. This is another key element to consider when determining how to get acquired

However, if you manage a well-run organization that has automated workflows, clearly defined operations, and a cohesive team to manage the business, the value of your business will increase dramatically. 

It is important to address this matter long before you go to sell. By creating a business that is easily transferable from one owner to the next, you will set yourself up for a profitable exit.

“Your company is only attractive to a buyer if it can successfully transfer to their ownership without negatively impacting its performance.”

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Documentation

Serious potential buyers will want to see you have orderly and consistent documentation practices in place. From your financial statements to your standard operating procedures, it is crucial to create clear documentation for your business. 

For starters, this will help prospective buyers easily verify that your claims regarding the performance of your business are accurate and true. In addition, it will help create a more transferable business, as we discussed previously. Lastly, it will help instill a sense of confidence that the business is run in a responsible manner. 

Preparing Your Company for an Acquisition

It is important to prepare your business for acquisition long before you intend to sell. When you focus on creating growth by attracting new customers, mitigating risk, increasing the transferability of your company, and creating clear documentation, you are setting yourself up for a profitable exit when you do decide it is time to move on.

Working with a business Advisor

Whether you sell to an aggregator firm or a private party, preparing your company for an acquisition is a big task as an entrepreneur. Regardless of whether or not you need to receive a valuation, redo your accounting records, or prepare staff for a transition, it can be helpful to work with an experienced business Advisor to understand how to get acquired. 

By utilizing their experience, they can help you prepare adequately prior to listing your business and ultimately create a smoother selling process and a higher purchase price. 

“Understanding the stages of an acquisition will help prepare you for what lies ahead when you do decide to sell.”

Stages of an Acquisition

While every acquisition has its own unique features, they all tend to follow the same stages. Understanding the stages of an acquisition will help prepare you for what lies ahead when you do decide to sell. 

Preparing to sell

Whether you run a small start-up or a big company, it is important to adequately prepare your business to be sold prior to selling. Ideally, you should start preparing 12–24 months before you think that you may want to sell. Preparing your business can be an in-depth process. For this reason, many entrepreneurs choose to work with an Advisor.

“Ideally, you should start preparing 12–24 months before you think that you may want to sell.”

Listing your business for sale

Once your business is adequately prepared, it is time to list it for sale. As the business owner, you can list it on one or more of the commonly used business listing sites. In addition, an Advisor can help spread the word about your business to their extensive network of potential buyers. 

Communicating with potential buyers

Interested buyers then reach out to you to discuss your business, ask questions, and determine if they would like to move forward with a potential deal. During this process, they will be weighing the pros and cons of your business. Ideally, a potential acquirer will make an offer once you answer all of their questions. 

Receiving a letter of intent

If you accept an offer, the buyer provides you with a letter of intent, or LOI. The LOI basically states they will buy the business if they are able to verify that all of the information that you represented is accurate. 

Signing an asset purchase agreement

The asset purchase agreement goes a step further than the letter of intent. It states all aspects of the agreed-upon deal and both parties sign it. This provides legal protection for both parties should issues arise.

Completing due diligence

During due diligence, the buyer and their team comb through your business records to verify you have accurately represented the company. They will examine your cash-flow records, verify supplier relationships, and review your customer service processes, among other things. You may also need to provide third-party reports about your business in order to create trust. 

The due diligence process is highly important for both parties. Since so much is at stake, many buyers and sellers find this stage of the acquisition to be the most challenging. However, with the right approach, you can successfully navigate obstacles that may arise. 

“During due diligence, the buyer and their team comb through your business records to verify you have accurately represented the company.”

Closing the deal

Once the buyer feels satisfied with due diligence, the deal closes. The buyer transfers the money to an escrow account, you transfer the assets to the buyer, and the money releases into your account. 

Transition and training

Regardless of whether you are running an ecommerce business that relies on online sales or a SaaS company, it is likely the new owner will need to receive training in order to successfully run the company. Most agreements include clauses stipulating a period of time where you, the previous owner, train the new owner on operating the business. 

By preparing early, seeking the right guidance, and executing your plan faithfully, you can work to create a successful and profitable exit from your company when it comes time to sell.