Questions every founder should ask when looking for an acquirer
For many entrepreneurs and business owners, an exit strategy often involves selling your company to another business. However, sellers should not consider this a certainty or take it for granted. It's essential that business owners work to understand which companies may acquire their firm and for what reasons.
Entrepreneur contributor Sam Hogg recommends asking the following questions when identifying which potential acquirers are best suited for buying your business:
- Have they acquired before? Asking this question will allow you to determine whether a company is likely to extend an offer rather than making, but not following up on, an inquiry.
- How often do they acquire other businesses? Companies that acquire other businesses with some frequency may indicate greater profitability, which is another sign that they are realistic, viable options.
- What are their acquisition deals typically worth? When eyeing particular companies, consider the deals they have made in the past. This includes tracking acquisition data and identifying patterns in behavior. Ask yourself how much they typically spend on acquisitions and whether that price range realistically represents your company's value. Business valuation services can help provide a clear picture of what your assets are worth.
- Why do they acquire? Determine whether a potential acquirer tends to buy businesses in order to diversify its offerings or to expand its customer base by acquiring a competitor. For example, "Google typically acquires to diversify its businesses, and thus might not be a credible target for a new search engine. In contrast, when Spring bought Nextel it expanded its subscription base, suggesting the company might be in the market for other carriers that could add market penetration to their existing cellular business."
When selling a technology businesses, identifying which buyers are more likely to make an acquisition is essential. Working with an M&A advisor can help you clarify your goals as a seller and strike a profitable deal.