7 Do’s and Don’ts For Getting the Best Possible M&A Deal

Whether you're a tech founder or senior executive, embarking on the M&A process can be undeniably daunting. You’ll obviously want to maximise your chances of getting the best outcome from the sale of your company, but how can you ensure you’re on the right path? 

Our founder, Miro Parizek, recently delivered a webinar on this very subject, drawing on his personal involvement in over 100 transactions across 25 years in the industry. Here are his 7 biggest don’ts, followed by his 7 biggest do’s. 

The first thing Miro warns about is failing to sustain a competitive process with multiple bidders. A founder/CEO must of course be realistic about the worth of their company, and be open about any risks associated with a sale. But you must also keep your cards close to your chest when dealing with different bidders, so that they remain keen to put in the highest possible offer. Remember that competition always breeds better outcomes. As Miro says, ‘if you end up with only one bidder and it becomes known… big mistake.’

Second, you shouldn’t allow buyers to dither and move too slowly. Miro says that failing to maintain a sense of urgency increases the risk of a faltering or less favourable transaction. Be diligent in your communications and regularly emphasise how both parties have a mutual interest in closing the deal.

The third point may be easily overlooked in all the excitement of launching into the M&A process. Namely, not properly preparing yourselves for presenting your company in the best possible way. As a successful business, you’ll undoubtedly be great at promoting your solution or services to clients and customers. But, as Miro reminds us, ‘to sell your company is a completely different process’. Senior decision makers must put their heads together, marshal their resources and knowledge, and carefully plan their pitch before talks begin.

The fourth key error, says Miro, is not appointing the right legal counsel for the process. By this he means legal experts who specialise in tech M&A transactions. It may be cheaper or more convenient to simply fall back on lawyers you’ve used for, say, dealing with HR contracts and other aspects of running your company. But this may prove to be a very false economy, endangering the deal further along the line.

At number five: don’t forget how crucial due diligence is. You should endeavour to have your virtual data room (VDR) set up properly – this is a secure online space where official documentation can be easily accessed by the vendor and bidders alike. Your accountants, legal advisors and M&A consultants must all have their respective repositories of information ready for inspection. 
   
Next, at six, you should not eliminate a bidder from the process too soon. Miro identifies this as an all-too common mistake committed by entrepreneurs, especially when they’re inundated with numerous NDAs from eager bidders. There may be a temptation to feel biased in favour of particular bidders right from the get-go, but it’s important that you neutrally assess their bids and never cut contenders out based on incorrect suppositions.

Finally, at seven, Miro reminds founders/CEOs not to underestimate the market readiness factor. The success of an M&A transaction can come down to timing, and you need to feel absolutely confident that your business is ripe for receiving a high purchase amount.

Moving onto the best ways to optimise a transaction, Miro’s first point is that you must get yourself on an equal negotiating level with your bidders. Basically, have all your ducks in a row, and maintain a competitive context with ‘as many alternatives that make sense as possible’. 

The second ‘do’ is to outperform your forecasts, so as to look as attractive an investment prospect as possible. This may sound obvious, but it should be seen in the context of point three, which is to ensure you present a compelling investment case that excites bidders. Miro points out that decreasing growth rates – say, growing at 10% in the previous year compared to growing 20% year-on-year before that – isn’t as compelling to bidders as a sustained growth rate. It may be worth postponing the process until your numbers look as appealing as possible.

With his fourth ‘do’, Miro again emphasises the absolute importance of having a structured and pragmatic approach to due diligence. The last thing you want is for the momentum of a transaction to be slowed or scuppered by confusion over some aspect of your accounts or infrastructure. Have the info vetted, prepared and readily accessible at a moment’s notice.

At five, do ensure you present yourself, as an individual, in the best possible light. While it’s not exactly a job interview in the traditional sense, Miro highlights that ‘you are being screened for your capabilities in the new company, whether you become senior vice president, or even eventually embark on the path to CEO.’ 

Onto the sixth point: do have a properly aligned management team, with everyone singing from the same sheet. After all, there may be times when people in your team take calls or attend meetings alone, and you don’t want them to contradict each other or speak out of turn. Regular briefings and strict coordination of messaging is important.

And, last but not least, Miro’s seventh ‘do’ is to ensure you have solid business systems in place – not just for the due diligence process as mentioned under the fifth ‘don’t’, but to allow for smooth integration post-acquisition. The wealth of SaaS enterprise platforms out there means it’s never been easier to digitise and optimise all your processes, and allow for a swift transition to the post-purchase era.