When you are a disruptive company in your market, you have to expect potential acquirers to be lurking. However, business analysts agree that most acquisitions don’t yield the expected results. In fact, between 50% and 80% of all mergers and acquisitions fail, depending on which research you believe.
A couple of weeks ago I spoke at two conferences, HostingCon in Miami and Silicon Beach Fest in Los Angeles, about how to build a business and get acquired. I was able to use my own experiences leading several companies’ acquisitions as examples − including, most recently, premium web host Media Temple’s acquisition by GoDaddy. I want to touch on four of the key insights that I shared in those talks.
Companies are bought, not sold
It’s an old cliché with a lot of truth to it. The bottom line is that, to get noticed by potential buyers, you need to hire great people and create high quality products while building a solid brand and an amazing company culture. If you succeed in doing that, you will get noticed. People are always interested in being a part of a great business.
Timing is everything
How do you know when it’s time to get acquired/to sell? The most common scenario is when you need additional financial resources to keep innovating and competing in your industry, but you don’t want to bring private equity money in. You will know it when you get to that point.
Find the right match
The potential buyer’s vision has to be a good fit to your company’s vision, so your team (and your customers) don’t feel like a bigger company is eating them up. Also, the two companies’ cultures need to be similar, or at least complementary, to each other. This last point is not to be taken lightly, as 30% of mergers fail because of culture clash according to a study conducted by the Society for Human Resource Management (SHRM) – examples of big M&A that got killed by a cultural mismatch include HP/Compaq, AOL/Time Warner, etc.
If you decide to shop around, be discreet – but keep your employees informed
Your employees are your most important assets, so while you definitely want to be as discreet as possible to the outside world, you need to candidly and transparently inform your employees as the pre-acquisition process unfolds. The same advice holds when talks with potential buyers start.
Of course, even after the acquisition goes through, the real work is only beginning. Both management teams will need to keep communicating, maintain their cultures while learning how to compromise, and keep their business plans nimble. Among many, many other things – some of which you’ll never be able to predict before you get there. Keep in mind the tips I’ve shared above, and you just might get a chance to find out for yourself.
