Most founders experience selling their business once in their lifetime. Unlike serial entrepreneurs, this is probably the biggest change that they will make in their lifetime. So it’s common for founders not to know what the process is and the difficulty in making a sale.
Let’s explore M&A from the management team’s perspective with Armando Biondi, founder of AdEspresso, acquired by Hootsuite.
The first thing that you should do as the founder of the company is to figure out why you are selling in the first place. Selling your company could be a very emotional process for you, so it is essential to remember your goal as to why you are selling. It’s not always going to be about the money; some founders want to sell their company to a bigger company for growth reasons.
Knowing your true north could also lead to better buyers. If you are just looking for a big payday, selling to the highest bidder would make sense. If you are looking for growth reasons, you should look for a good cultural fit and preferably a sound go-to-market strategy.
Now starts the formal process of selling your business, and we want you to be prepared for it. Here are some of the things that you should prepare for:
Diligence is hard and will be time-consuming. As the founder of the company, there will be a lot of paperwork, most of which you won’t understand, but needs to be signed in a very short period of time. You need to hire a very good lawyer that you can trust and make sure that you have a good alignment of what you want to achieve out of the deal.
You might also need a banker to get the best price for your company. Unless you are happy with the buyer’s offer, it is in your best interest to get professional help in negotiating and assessing the value of your business. It is also important to note that this will be an expensive process for you. Selling your business is a very lengthy process with many people involved, and it will cost you money.
But the biggest challenge for you, as an owner, is to make sure that the business is not distracted by the deal. So at the initial stage of negotiations, you might have to do all the work. Wait until you are sure about the buyers and that the deal will go through before you announce it to your people.
For your people, this will be a massive change, so absolute communication is critical. They need to be happy and feel secure about their job; otherwise, they can leave, and you lose value in the sale.
Clear communication with the buyer is also important. At some point in the deal, it will become a huge trust exercise on both sides. From the acquiring company’s perspective, they are paying tens or hundreds of millions of dollars, and they want to make sure that they are getting the value that they are paying for. On the founder side, you are giving away something that you worked for day and night, every day for a lot of years, and you want to make sure that they are not destroying it.
Selling a company can be a long, costly, tedious process and you need to be ready for it. As long as you know why you are selling your company, you can avoid the doubt that will creep in and focus on the sale. Be prepared to hire good people to help you through this process, and be sure to focus on the communication side of things when the sale is about to get real and you need to announce the deal to the entire company.