Although my startup was growing nicely, I realized that I wanted to expand the features for my online invoicing platform to include more payment functionality. Rather than spending considerable time building it, I decided to fast-track it by acquiring another startup that already had significant payment technology. The acquisition has provided numerous benefits.
Taking this approach means my existing customer base can enjoy that functionality while new customers see a more comprehensive solution. It was my first time acquiring another company, and doing so as a startup presented some unique challenges. Here are some insights that you can use to achieve a successful acquisition strategy:
I spent considerable time looking for acquisition candidates. Do your due diligence to make sure they have the features, technology and scope that fit your strategic objectives. It’s also important to see if they are in a place to consider an acquisition. It took some time for us to craft communications to approach these companies and see if there was a strategic fit and agreement. I stayed away from companies that looked like they were struggling because I didn’t want to inherit problems.
The company we went with fit all the criteria I had envisioned for the ideal acquisition target. They have the technology and customer base that integrates well with what our company offers. We knew we could mutually benefit from coming together. While they weren’t actively seeking someone to acquire them, they showed interest when I contacted them.
Develop a Strategic Acquisition Recipe
I now have a process approach for future acquisitions that includes a series of steps that work for completing an acquisition. This includes the approach, timeframe, agreements, communication and closure of each deal. That’s not to say that there won’t be tweaks along the way as I learn more skills and lessons from each deal. Write down the process you used so you can review and apply it over and over.
Spend Time Getting to Know Each Other
When it comes to moving to the next step in acquiring a company, the experience is a bit like dating. Take the time to hang out and get to know each other, swap stories and information, and discuss your beliefs and aspirations for the future. It’s during this time that you really understand if you are compatible and whether it’s a relationship that is meant to go the distance.
For us, this process included interviewing all members of each team, sharing financials, and documenting strategies as well as quantifying results. It was when all of this work was done that I really could see that it was going to be the right move.
You may get to this point and realize it won’t work. Don’t push forward anyways. You can back out at this point and will want to if you sense that there is anything that doesn’t feel good. Listen to your instinct and analyze the data before forging ahead only to find that the integration work is like trying to fit a square peg in a round hole.
Don’t Rush the Integration Process
You don’t have to bring everything together all at once when the acquisition process is complete. Take the time to do it right so that everyone on both teams gets comfortable and you determine where synergies exist. Finding these is important because it will allow you to get rid of any duplication before you proceed. Jumping straight in will mean missed opportunities and will unnerve both sets of audiences and client bases.
Have a communication plan in place to discuss the acquisition with internal and external audiences. Focus on the rationale and what it means for all customers involved. Employees of both companies will want to know where they fit into the new version of the business, so make them feel included and provide those critical details. Be prepared with answers to questions you believe may come up so you can reassure everyone and put all the emphasis on the benefits of such a transaction.
Envision the Outcome
Throughout the process, including unexpected barriers and longer-than-anticipated timeframes, I kept my eye on the prize, which was the desired outcome that I had in mind since I began my search for an acquisition target. This kept me focused and determined to work through every issue that appeared. I knew that our customers and prospects would benefit from us joining forces, so this outcome kept me motivated and committed to seeing the acquisition through.
I ensured that those from the company we acquired also stayed the course by regularly communicating with them and collaborating on decisions. This led to an overall smoother process and has now yielded the results I had hoped for: Customers love the additional payment features they have at their disposal while prospects are signing up quicker than ever due to the enhanced value.