We’ve all heard the magical stories about the perfect buyer showing up on a startup’s doorstep offering a deal they can’t turn down.

Sounds nice, right?

Unfortunately, that’s not the experience for most businesses. Finding the right acquirer is often a long and time-consuming process. For many, it starts years before they actually get acquired.

There are many paths to sale depending on the specific circumstances of your company. In this article, I’m talking about selling a company that you bootstrapped, not necessarily a startup where you have investors to please. That’s a whole different animal.

Our team has advised on or been a part of more than half a billion dollars in enterprise-value transactions. Here’s what we’ve learned about finding the right buyer.

Step 1: Identify what you want

The first step to finding the right acquirer for your business is identifying what you want. If you go into the process without a clear understanding of your terms, you’ll waste time and money. You may even end up with a deal that doesn’t match your goals.

No matter what the end result might look like, you have to start with what you’d want if you were driving the acquisition bus.

So ask yourself: what do I want for me?

In Build for Sale or Build for Growth, we shared Adam Stokar’s experience of being burned out at Club OS, the company he founded. Through conversations with his team and with me, Stokar was honest with himself — he didn’t want to run the company anymore. He wanted to sell and eventually be able to walk away.

You have to have an authentic conversation with yourself about what you’re looking to accomplish.

We worked with another client who wanted to be acquired by a larger firm where he’d have the opportunity to learn skills required for operating a bigger operation.

Many entrepreneurs have fear around this internal process — perhaps around the sale itself and frequently about what comes next. They may stall or go around in circles because they’re struggling to figure out what their second mountain is, as author David Brooks puts it.

See: The Most Common Limiting Beliefs of Entrepreneurs and How to Overcome Them

Your next question is: what do I want for my company?

Trajectify coach and Senior Vice President of AccessDx Holdings Joe Spinelli has worked with plenty of startups looking to sell. “One of the biggest concerns from bootstrapped entrepreneurs is, ‘what’s going to happen to my team’?” says Spinelli, who spent his early career in investment banking. “You know, a founder is saying to himself, ‘these guys have been riding with me for the last 10-plus years. Is this an opportunity to mark a milestone and help them celebrate in it?’”

If you want to make sure your team keeps their jobs or your company retains its own branding or cultural values, those are things you’ll need to be clear about in your negotiations.

And finally: what am I willing to live with to get from here to there?

For most of our acquisition clients, the price tag isn’t the first consideration. That doesn’t mean it’s not a big part of the calculus, though.

Once you’ve identified the things that are most important — whether that’s what happens to your employees, what your role is, or how your company’s brand continues — consider the number you’re looking for and the length of time you want to be a part of the process.

In almost all cases, the entrepreneur goes into a sale with a limited horizon. They see the writing on the wall. They’re used to being in control. Once they give up control of the company, it’ll only work so long for them to have a boss.

Don’t tell potential acquirers your target acquisition price, says Spinelli. You don’t want to end up negotiating against yourself. You do want to have an idea of it in your head, though.

Step 2: Identify your ideal type of buyer

You have two primary options — a strategic buyer or a financial buyer.

In a strategic acquisition, someone is acquiring you because of the intrinsic product, assets, or intellectual property of your company.

In a financial acquisition, someone is buying you because they want to run the business and generate cash going forward. Often, they want you, the founder, to keep running the business for them and focus on a future, subsequent sale.

Most of our clients are looking at a strategic acquisition, which could involve selling to a number of different types of buyers:

A partner. Someone with complementary skills, services, or offerings
A competitor. Someone who would want to combine markets to own a bigger part of the marketplace
A private equity firm. A firm that’s rolled up several companies in your space to create a portfolio of mutually beneficial, strategically aligned businesses

You may have an initial idea about what type of acquisition would create the best home for your company. That gut level insight might be right on target — or it might not be. Spinelli cautions entrepreneurs against stereotyping potential acquirers and their interests.

“There’s a lot of soul-searching that can occur throughout the transaction process, and not just about the financial terms of the transaction,” he says. “I’ve known founders who were planning on taking a break and never saw themselves as a part of a large organization who were suddenly enthralled by an opportunity to finally have supporting resources to execute on a bigger vision. Similarly, those who expected to be lifetime executives post-acquisition may end up finding much less enthusiasm for elevated management responsibilities. A buyer’s classification doesn’t always translate to their need, interest, and goals for your business, or the importance of preserving and enhancing your company’s culture to its future success.”

Merging with a competitor

If you’ve never considered joining forces with a competitor, you may be wary of making those connections. You’re not wrong — there’s certainly some nuance to how you have those conversations so that you protect yourself if a deal goes south.

On the other hand, when competitor acquisitions work, they often come with the tremendous benefit of owning a greater market share, perhaps solidifying their position as a market leader. Because of the inherent risks, it helps to have an advisor there to navigate and anticipate those conversations.

When are competitor acquisitions not a good idea?

If you’re merging with a competitor just to get them out of the way, try a different tactic.

When I was the COO of CDNow, our Board decided to merge with our biggest competitor. Intense competition kept undercutting us in what was a very low-margin business, and we saw them as a nuisance. We were both public companies, so it was a deal with lots of transparency. It was intricate, delicate, and costly. And in hindsight, it was a mistake. Sometimes one plus one equals less than two.

When I have clients looking to make the same mistake, I remind them that we slow our growth when we’re looking back over our shoulder. Just keep looking forward and moving forward.

Step 3: Make your list and do your research

If you haven’t started to build a list, now’s the time.

Many companies begin making those potential sale connections long before they’re ready to sell (or even think that’s what they want).

Max Rice, the founder of SkyVerge, wasn’t planning to sell, but he welcomed the conversations that came his way. “I’ve seen other entrepreneurs that don’t take those conversations as they come along, and I think that’s a mistake,” says Rice.

“When we had interest from someone, we’d have a conversation and see where it goes, make a connection,” he says. “We never really had anything come up that was super interesting until last year in the middle of the pandemic.”

Rice ultimately sold to GoDaddy. “What got us interested was their vision of what we were going to come and do,” he says. “Unlike a lot of the other acquirers that we talked with where we were going to be bolted onto another business or do something relatively small, with GoDaddy, it was this combined vision. We were going to go build the next generation of e-commerce together. And that was something we had an interest in as a business.”

Because Rice and his team had been having those conversations, they’d built an understanding of the marketplace and what they wanted.

If you’re starting to build a list, ask yourself who might match the profile of what you’re looking for? Whose strategy might you fit into? In most instances, you’re looking for a partnership — whether that’s between you and a larger company in your industry, you and a competitor, or you and a private equity firm.

Researching buyers for your business

There are many questions you’ll want to answer about potential acquirers. It will help you not only decide which company might be right for you but also figure out how to position your company for the best impact.

Who are your potential acquirers?
What other kinds of companies are they acquiring?
What are the models under which they integrate these companies?
Are they acquiring for talent? Customers? Profitability? To grow market share?
Have employees stayed with the companies after acquisition?
Have founders stayed with the companies after acquisition?

Much of this information is publicly available, or discoverable with a modest effort. Many companies put out press releases when they do acquisitions, and larger organizations publish acquisitions on their websites.

Don’t just stick to the internet, though. Talk to some of the advisors, brokers or bankers that might’ve represented people in transactions. Talk to the founders who were acquired by a company you’re interested in.

I’ve known entrepreneurs that talked to 60 private equity firms before they really figured out who most aligned with them.

You also need to be realistic about where you might fit into their strategy. “If the transaction size you’re talking about is 10 times the size of the largest deal they’ve ever done (or 1/10th of what they’ve done), you’re often doing yourself a disservice,” says Spinelli. “You have to be able to make the case about why this is a good deal for them.”

He also cautions entrepreneurs not to just talk to whatever firm reaches out. If you can’t see how they’d fit your goals or how you’d fit into their strategy, spending that time is a waste of resources.

I also advise entrepreneurs to avoid talking with companies that pass you off to intermediaries or subordinates — where you’re not talking to the principal that you’d ultimately be working for. Spinelli offers an alternative viewpoint when you’re dealing with a private equity firm.

“There is value in going through a junior discovery process,” he says. “It’s incumbent upon you to understand the firm’s process and where you are in that process. Don’t expect them to be transparent about it or about their intent.”

You could easily get consumed by this process. It requires considerable legwork, and you might want to engage outside assistance.

Who can help you find the right buyer?

In every instance where we’ve assisted entrepreneurs through an M&A process, they cared about what happened to them and to their team. They weren’t only looking to maximize a financial outcome. They really wanted to find the right partner.

When that’s the focus, an outside consultant can bring a holistic approach whereas an investment banker may become a costly distraction.

Final thoughts

Many entrepreneurs aren’t prepared for how much time and energy an acquisition process can take, especially how completely it can divert their attention from their core business.

The companies that are best-positioned to find the right acquirer are the ones that have been nurturing relationships all along and developing a very clear understanding of their place in the market.

Spinelli said it well in our conversation about acquisitions. “The best thing you can do to pick the right buyer is to truly understand what business you’re in, what value you deliver and where you deliver it. It’s all about knowing your company better than anyone else.”

The coaches on our team have been through the acquisition process from every angle — in private equity firms, as startups being acquired, as larger companies doing the acquisition, as competitors merging. And we’ve coached our clients through millions of dollars in deals.