Selling Your Startup

16Strategic versus Financial Acquisitions

Not all mergers and acquisitions are the same. Buyers can have very different reasons for wanting to acquire your company. These reasons can have a substantial effect on what happens:

• What your business may be worth to them
• What their expectations are in due diligence
• What factors are or are not important
• The terms that are up for grabs
• The transition

As with selling anything, the more you know and understand your buyer pool and the buyers in it, the better you can tailor your pitch and the more negotiating power you will have.

Different Types of Acquisitions

When it comes to acquisitions, you can generally think of them in two different ways: financial or strategic.

Financial Acquisitions

Financial buyers are looking at this purchasing opportunity as buying a financial asset—a stream of cash flow or return on their investment capital. Buying businesses is their business and form of investment. They may be more conservative in their offers. They are more likely to keep the current executive team in place for a longer period of time, provided the numbers are being met. Financial buyers may be more likely to use financing and debt to acquire your company. These transactions are more likely to happen later in a company's life cycle and typically the players going after this type of acquisition are for the most part private equity firms.

Keep in mind that if your startup has yearly revenues of less than $5 million, a financial acquisition ...