Your exit goal as a venture-back company is to be bought not sold. Holding the top spot on several acquirers' target lists is the best way to achieve that, and it makes getting through the deal screening process much easier. Understanding the acquisition strategies and parameters of your potential acquirers will help you to begin positioning and preparing your company to make it to the top of the list.
Gaining this intelligence is not that hard, but I find very few small companies take the time or have the discipline to do it. Here's how it's done.
Take our merry band of managers from yesterday's post, they had no idea what eBay's acquisition strategy is, but they should have. Take the low-hanging fruit first - enter "eBay's acquisition strategy" in Factiva or Lexis-Nexis for the last two years and you will see 62 written articles. Now google eBay and "acquisition strategy" and you will get 26 results. Check the earnings call transcripts, especially after a big acquisition. Research analysts will usually ask several questions about how the acquisition fits into the strategy. Next, find the press release about the company's Analyst Day, as it usually lists who attended from the research community. Then call an I-banker from those firms and get each of the research reports from Analysts Day, they usually have a paragraph on acquisitions. Also, ask the banker if he or she knows the strategy. Often times they have met with the company and know exactly what the strategy is. Keep digging and pretty soon, I guarantee, you will have a very clear picture of your potential acquirer's strategy, as well as, a wealth of knowledge on their operations, strengths and weaknesses.
Take that cobbled together strategy and ask yourself honestly does your company fit within it? What changes does your company need to make to be more attractive to the acquirer? What are they trying to accomplish with acquisitions? Does your company solve their stated problems and help them reach their stated goals?
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