Author: Corey Ferengul
Mergers and acquisitions (M&A) are among the most significant milestones in a CEO’s journey. They are celebrated as turning points for businesses, yet the path to a successful deal is anything but straightforward. During a recent discussion on Opening the C-Suite, Mike Shannon and I unpacked the intricacies of M&A. Below, I’ve distilled the key lessons from our conversation to help demystify this high-stakes process.
The Reality of Acquisitions: It’s Not About You
As Mike put it, “Startups often believe that traction alone will attract a buyer, but in reality, acquisitions are rarely about the seller.” He’s right. From my experience, large companies don’t acquire businesses out of admiration—they do so to fulfill their own strategic needs.
Acquisitions typically revolve around:
Filling strategic gaps: Whether it’s a product, a customer base, or technological expertise, the buyer’s focus is on how you fit into their vision.
Accelerating growth: As I explained in the episode, companies often face pressure to show results quickly, especially in dynamic areas like AI. Acquiring existing capabilities can be faster than building from scratch.
Market presence: A startup with solid traction might tip the scales for a buyer weighing a “build versus buy” decision. Your presence could demonstrate a level of market validation they lack.
The harsh truth? Buyers care about what you can do for them, not how ready you are to sell.
Timing Matters: When the Stars Align
One of the biggest myths about M&A is that you can dictate the timing. The reality is more nuanced. As I noted, “Your readiness to sell doesn’t mean it fits anyone else’s strategy.” Strategic alignment—between what you offer and what the buyer needs—is the real driver.
What can startups do in the meantime? Stay informed. Regularly track the strategies of potential acquirers. Understanding their priorities helps you tailor your pitch and identify when your value aligns with their needs.
The “Build vs. Buy” Equation
Mike raised an excellent point: Why don’t big companies always choose to build their own capabilities? The answer lies in the complexity of execution. For example:
Time to market: Building in-house can take years, while acquisitions offer instant access to established teams and technology.
Resources and expertise: As I shared during the episode, we once began building a solution internally, only to realize we lacked the expertise to execute effectively. Acquiring an 80% fit allowed us to avoid significant delays.
Buyers also factor in market dynamics, like competition and scalability. If a startup has established itself as a leader in a niche, it can reduce the buyer’s risk and accelerate their goals.
Preparation: The CEO’s Role in M&A
Whether you’re selling or buying, preparation is critical. From my perspective, these are the key areas where CEOs must focus:
Clarity on strategy: What are you trying to achieve? As the seller, align your pitch with the strategic goals of potential buyers.
Transparency and trust: Build credibility early. As I’ve often said, relationships matter. The more trust you establish during due diligence, the smoother negotiations will go.
Metrics that matter: Buyers will scrutinize your financials, market traction, and customer retention. Be ready to defend your data and articulate your value proposition.
Mike’s experience with his own company’s sale reinforced this point. “The buyer’s first questions weren’t about our product—they wanted to know about our customer base and operational scalability,” he explained. Knowing what buyers prioritize can be the difference between closing the deal or losing it.
Lessons from the Table: What CEOs Should Remember
Having been on both sides of the table, I’ll leave you with these parting insights:
Acquisitions aren’t exits. For many leaders, the work continues post-deal as you integrate teams, technology, and processes.
Stay focused on your business. As tempting as it is to chase potential buyers, your best leverage is a thriving, growing company.
Don’t be afraid to walk away. The wrong deal can do more harm than good. Be selective and ensure alignment on both strategy and values.
As we wrapped up the episode, Mike summed it up perfectly: “M&A is a game of preparation and timing. You only get a few shots, so make them count.” It’s a sentiment I wholeheartedly echo. For CEOs navigating this terrain, the stakes are high, but with the right mindset, the rewards can be transformative.
Have a question or a topic you’d like us to explore? Let us know! Until next time, keep opening the C-Suite.
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