At startup founders When thinking of mergers and acquisitions (M&A), we tend to think of lavish “Mad Men” operations, which include a drastic change of office and expensive rebranding. The truth, though, is that mergers and acquisitions aren’t limited to flashy corporate businesses and they don’t have to throw off corporate culture.
In fact, since the beginning of 2021, of the 530 startup acquisitions, more than half were startups buying other startups. More early stage companies are climbing aboard the M&A train to harness the technology and talent of fellow startups and absorb competitors. They have also realized that deals do not have to contain exorbitant price tags and bureaucracy with big companies.
I know this firsthand from 15 years of buying and selling companies. Previously, she worked at JP Morgan, facilitating mergers and acquisitions for corporate banks, and took what she learned into the startup space. I made 12 acquisitions in my Kiwoko retail platform, which helped it grow to over €150 million in revenue, and it was eventually sold five times.
Mergers and acquisitions are particularly beneficial for startups struggling with operational expansion because they primarily buy the cash flow, revenue, and traffic of other businesses, meaning that startups capture a larger share of their markets. It’s also a good way for startups to find, integrate and experiment with their value proposition. But the problem is that most founders don’t know how to get started with mergers and acquisitions and succumb to the shadows of the big players. But mergers are accessible and beneficial for businesses of all sizes.
The human side of mergers and acquisitions is always the hardest.
These are my three insider tips on M&A for a startup:
Let your inner team roll
Mergers and acquisitions naturally come with some friction and cost, but unlike businesses, startups don’t need to outsource to smooth the steps. You don’t need investment banks, advisors, legal teams and consulting firms to ensure that everything is going right.
Founders can conduct commercial and financial examinations with the support of internal resources such as the accounting department and lawyers, in addition to leveraging their network and conducting due diligence through trusted connections. Sure, you have to spend a lot of time and focus on this proofing stage, but it’s possible and effective without involving new players.
Besides logistics, founders need to actively analyze the value of the target company. For example, every one of my acquisitions – even with significantly smaller companies – has had better purchase terms with at least one supplier.