5 Things Tech Startup Founders Need to Know About Tech M&A

5 Things Tech Startup Founders Need to Know About Tech M&A

It’s the dream of many tech startup founders: build a business from the ground up, then sell it or merge with another company to fund retirement, a new business, or the lifestyle you’ve always dreamed of. But tech M&A is a fundamentally different beast from building your startup. You need an expert team to market your deal, negotiate, and close the transaction, and that means seeking an M&A advisory firm that knows your industry. What else do you need to know as you move toward a hopefully lucrative sale? Here are five things tech startup founders must know about M&A.

Integration Begins Early

How will the two companies come together? Without an integration plan, almost nothing else matters. Before negotiating a deal, make sure the buyer has a vision for integration. And as you negotiate the deal, you should also pay attention to the specifics of integration. The buyer will need to build an integration team that includes people from both sides of the deal. It all starts with a 100-day transition plan that moves things along swiftly without rushing or forcing rapid change.

Understand the Importance of Culture

Culture makes your company what it is. And for a lot of employees, company culture is critical to their satisfaction at work. So sudden cultural shifts can spur conflict and potentially even undermine the merger. Get specific about the culture of the final entity, and work with the other party to ensure that culture will improve life for workers—not make things worse.

People Work for Money

Your startup is your passion project and your baby. But your employees are working for money. They may worry that the new company will cut their jobs, their benefits, or their quality of life. So you need to motivate them to stay. This is doubly true for your most valuable employees. Incentivize retention with a retention bonus, and consider promotions for people whose positions are not fully reflective of their value to the company.

Identify Your M&A Goals

Why do you want to sell your company? The process of tech M&A really begins there. And the more specific you can be, the better. If you want to retire, you should work with a wealth advisor to identify exactly how much you need. If your plan is to build another business or go public, here too you’ll need expert financial advice. Vague principles lead to failed deals. Armed with clear plans for the future, you’ll be better equipped to map out a path from here to there. This is where the right advisory team is really critical.

Be Patient

A strategic approach to tech M&A is also more likely to be the most lucrative. Working with an advisory team can help you identify the right buyer, prepare your company for an acquisition, and ensure the deal moves swiftly along. The key here is to find the right buyer—someone who values what your company offers, someone who can be faithful to your vision—rather than just rushing to find the first interested purchaser.