Imagine one of your first in-depth interactions with a major buyer for your company. You and your co-founders walk into the board room to meet with the other party. There are three, maybe four of you there from the leadership, suit and tie, ready to go. Then somewhere between 12 or even 20 executives, lawyers, quants walk in and sit down from the opposing team—ready to dissect every inch of your business. The reality sets in; you are overmatched.
Believe it or not, this is the exact scenario many tech CEOs and founders face during the sale of their company. What's all the more concerning is that it happens at the most critical times, like during the due diligence or negotiations phase, when the pressure is highest and the risk profile is the greatest. Make a mistake here and it will cost you millions in value or worse, the entire deal.
Now, amidst the realities of our virtual existence, take those high-pressure phases and cut your runway in half. Things are not happening slower; they are far faster. The mental chess of negotiations and due diligence is now happening at warp speed. This isn't an anomaly. It is becoming more and more the norm.
What can you do about this new situation? You must prepare to survive due diligence and have razor sharp execution during negotiations. You don't have the time to backtrack anymore or do "last minute" preparation.
To be fair, we've been accused of tooting our own horn here at Corum but understand, the founders of Corum are former Tech CEOs who've built and sold their own companies. We have walked the walk and been in the seller's shoes. Our process and our database were purpose-built with all of our collective experience in mind, knowing that in order to help founders like you in the future, the entire Corum process had to be razor-sharp, so you can be successful in these scenarios.
So, the best thing you can do is get professional help. But, if you still want to go it alone, here is what you need to create serious leverage during the negotiations and due diligence processes:
A Proper Strategic Audit
When was the last time you did an unbiased, maybe brutal self-assessment of your company? Is your company structured for long term success—your marketing, sales, management? Most importantly, are you positioned appropriately within the market, and can you tell a story that aligns you with the latest tech trends driving valuations up for companies that are exiting?
The due diligence and negotiation phases are intertwined. You must lower the "perceived risk" for your buyer to gain more leverage in order to demand a good price. If there are things like IP issues or you are on the tail end of an aging tech trend, you'll be in a suboptimal position.
To get your company prepared to go to market, you need a no-nonsense strategic audit with a room full of former CEOs, technologists, M&A lawyers, and dealmakers. We call it the IPM here at Corum. After doing this for nearly four decades, we've learned that "team selling" is the key to an optimal outcome.
Buyer Knowledge
If we know the buyer, which we usually do at Corum, we know about previous offers, how they prefer to structure them, and what wiggle room they typically have had in the past; without that, you are guessing more or less.
In your due diligence on the buyer, did you talk with other acquisitions, and reference checks? If so, did you ask them how the negotiations went, and do you believe what they told you? People are creatures of habit, do you know this creature and their habits? Is their "vision" for after the deal what you are excited about, or is it just about the money? If you cannot answer these questions, you are not ready. You are going to the negotiation table blind.
Multiple Bidders, At the Right Time
We've said it before, and we'll say it again. One buyer is no buyer. Even if you have that "one perfect buyer" and "you know each other," it doesn't matter. When push comes to shove, you need serious leverage. Nothing does that better than a virtual "room" full of competing bidders. Without it, you will feel that you cannot walk away from a rotten deal or a buyer not aligned with your vision.
Walking away from a buyer is hard, we never recommend it, but you must feel good about how they will treat you, your employees and your customers after the deal. More bidders mean more options and a better outcome for you and your company.