A lot of euphemisms get thrown around at this point to avoid scaring founders; you’ll hear “building a closer relationship” or word salads like “working together in a more structurally consistent manner” or if the person has a New York investment banking background, “Let’s get a deal done” likely delivered staccato with a finger. jabbing. the. table. for. emphasis.
At some point early in this process, you’ll want to ask for an Initial Indication of Interest, or “IOI. ” Legally, it’s a worthless piece of paper, but it keeps honest people honest.
Having one key point person will streamline the process and allow the founders to focus on ensuring that the business doesn’t fall apart from all of the distraction.
You’ll probably hear this advice if you ask an investor about raising money and selling a business concurrently, and it’s good advice.
In fact, thinking like a buyer often helps make your business better even if you never sell, and if you do end up exiting through a merger or acquisition (far more common than an IPO in any event), you’ll be that much farther ahead.
You typically won’t be tearing into the technical wizardry, but rather demonstrating that you have what it takes to play the game: a good business model, a reliable product, strong team chemistry, and a product that fits well into the acquirer’s business.
In a large transaction, it’s common to hire an investment bank to run the process; founders tend to manage smaller transactions themselves.
Some founders are better at this dance than others, but once a buyer expresses genuine interest, the next steps look exactly like the formal process.
You’ll need to bring employees into the circle as the diligence process unfolds, and involving your top people is almost always the right initial step.
Either way, the founder or the banker will comb through a list of potential acquirers and pitch the business to them in a process that feels somewhat like raising money.
From then on, you’ll almost certainly be prohibited from talking to new buyers about the business at all, so your only fallback options are the others already in the process.
It’s a fuzzy concept, but typically it means that someone with agency (either a C-suite executive or someone in the corporate M&A group) tells you that they want to consider acquiring your business.
Unfair, perhaps, but entirely reasonable considering that the buyer had to consider not just our results but how to integrate our team and product into their company.
Running a sale process, though, is much different from positioning your company for sale, and positioning for a sale is very easy to do while you are focused on execution and fundraising.
You need your leaders on board with the deal, and it is much easier to get people excited when they have a say in the process and outcome.
If the business is growing and the results are strong, founders are apt to face few questions from investors about the details of how they run their businesses.