Tips for Preparing for M&A Opportunities

I sold my first startup in 2020 for a life-changing amount. A close friend who’s deep in the M&A process reached out last week for advice. Here's what I told him on how to navigate the process of selling your company: ~~ 1) Contrary to what ppl say - companies are sold, not bought. You can’t force a sale, but you can lay the tracks for it. The best time to start M&A convos is 3-5 years before you expect to sell it. Investors prefer to see trends over time. Seek them out, tell them your plans and then outperform - this is how deals get done. == 2) Create competition. I always assumed investment banker fees were absurd (and they are), but at the end of the day - they are typically the best way to create perceived urgency which drives a decision to buy. No buyer wants to lose a deal, especially to a competitor. == 3) The right buyer > the highest price. Usually, you roll equity into the new deal, so this will be a long-term relationship. A great buyer makes post-sale life easier. A bad buyer can make it miserable. Look for: • Aligned values • Clear vision • Mutual trust I gave up millions in deal value for security in an aligned buyer whose values I trusted. == 4) Price is only one lever. Everything is negotiable from the terms of the deal (Cash vs equity, Earnout,etc) to how your team will be compensated (salaries, vesting acceleration, new option grants). The “headline number” doesn’t tell the whole story. Optimize for the terms that matter most for both you AND your team. == 5) Don’t delegate trust. The banker and lawyers are there to protect you, but they aren’t running the deal. Stay in touch with the buyer directly. Understand all the terms and conditions. Miscommunication often happens when everything goes through legal teams. == 6) Protect your team. Keep the sale process quiet until it’s necessary to involve others. M&A is distracting, stressful, and often falls apart. Your team should stay focused on running the business while you handle the deal. == 7) Operate like the deal isn’t happening. Until the money hits your account, assume the sale won’t close. Deals fall apart all the time. Keep running your business as if you’ll own it for the next 10 years. == 8) You’ll question yourself. During negotiations, I second-guessed the deal constantly: • Am I leaving too much on the table? • Could we sell for more later? Leaving upside for the buyer increases the likelihood your deal gets done. Focus on the big picture. == 9) Post-sale life isn’t what you think. I thought the money would fix everything. It didn’t. Selling didn’t make me immediately happier or more fulfilled - but it did me time to figure out what actually mattered and eventually it came to me. == 10) Survive the process. Selling your company is probably one of the most emotionally exhausting things you can do. It will drive you insane if you’re not careful. Take time to go for a run, meditate, do breathwork or whatever it takes to keep your mind right.

Help founders get acquired. Most founders are completely unprepared for what happens when it's time to sell. There are no guidebooks. In my conversations, I find the knowledge gap is staggering. Here's the reality of startup M&A that no one tells you: The "acquisition process" feels like navigating a maze blindfolded. I had to learn everything on the fly when my startup received acquisition interest. What I discovered shocked me - and could save you months of frustration. Selling your company is nothing like fundraising. While VCs make quick decisions hoping for 100x returns, acquirers move at glacial speed, obsessively asking "how could this fail?" What I learned going through Stilt's acquisition: 1/ Time kills ALL deals. The biggest mistake? Being wishy-washy. "We're open to selling at the right price" signals you're not serious. Have a number in mind and be decisive - or watch your deal evaporate over months of indecision. 2/ Every internal team at the acquiring company will find reasons not to buy you. "We could build this ourselves" is the default objection. You need a powerful champion inside (CEO or VP) to overcome this institutional resistance. 3/ Each potential acquirer values completely different things. One wants your customers, another your tech, another your team. You must craft 5-10 different narratives tailored to each buyer's specific strategic needs. 4/ Acquisition processes drag on for months. Deals can fail at any stage - even when you're reviewing final documents. The acquiring company can simply say "our strategy changed" and walk away. 5/ At $1M-$5M ARR, bankers won't touch you. They want $10M-100M+ deals where their percentage means something. You'll need to run this process yourself, without the infrastructure bigger companies enjoy. 6/ If your team is distributed internationally, expect a discount. US acquirers see offshore engineering teams as a complexity they'd rather avoid entirely. The market values "clean" structures, even if your distributed team is your strength. 7/ Every founder thinks "they'd be stupid not to buy us - look at all the money they'd waste building this themselves!" Reality: Companies make irrational build vs. buy decisions constantly. Logic rarely wins. 8/ Don't nitpick price once you have an acceptable offer. Remember: you get $0 until the deal closes. Aggressive negotiation just delays closing and increases the chance the deal implodes completely. 9/ Prepare for documentation requests that seem designed to kill deals: "Where's the contract saying you own the IP from that contractor you hired 3 years ago?" Get your data room in order early. Most founders struggle here. 10/ If you're profitable and not running out of cash, you have leverage. Use it. The worst position is when acquirers sense desperation - they'll wait until you're nearly dead for a bargain. Most founders enter this gauntlet completely unprepared. Don't be one of them.

A portfolio company of mine was recently acquired, and it reminded me of some advice I’ve shared with founders during my investing career. 🧬 Understand Buyer Motivations: Know whether the acquirer values your tech, team, or revenue to align your pitch. 🔒 Fully Commit to the Process: Selling is highly distracting; don’t proceed unless you’re all in. 🕉️ Manage Team Expectations: Prepare your team for potential deal failures to maintain morale and performance. 💰 Maintain Financial Leverage: Keep at least nine months of runway to avoid losing negotiating power. 👔 Hire an M&A Banker: Their expertise and negotiation skills can prevent costly rookie mistakes. 🏁 Secure Multiple Bidders: Competition drives better terms, so always aim for more suitors. 📂 Prepare a Data Room Early: Detailed documentation is critical for due diligence and speeds up the process. 🕵️ Limit Information Sharing: Only involve aligned stakeholders to avoid leaks and disruptions. 📣 Leverage Leaks if They Happen: Use media leaks strategically to spark interest from other potential buyers. ⏳ Anticipate Delays: Corporate priorities can shift; don’t panic if talks temporarily go silent. A couple of new additions based on our current market conditions: 📈Let it grow: If you’re reasonably happy with your company and team, stick with it. You may be surprised by how hard it is to recreate the spirit of creative collaboration and how much value a thriving team can add in a few years. 🐦 A bird in the hand…: On the other hand, if you want liquidity and a very good opportunity presents itself, take it. It may not come around again for a while.

In M&A, most sellers assume diligence begins 𝙖𝙛𝙩𝙚𝙧 the LOI is signed… But by that point, the clock is already ticking, exclusivity is locked in, and any surprises (real or perceived) can become deal-breakers or issues that chip away at price. The truth is, buyers walk in with a very specific checklist. They’re not just verifying financials, they’re looking for risks, for inconsistencies, and sometimes, for anything that gives them leverage, or even a reason to walk away. Here’s the good news: if you’re the seller, you can beat them to it. It starts with understanding what buyers are looking for: 🔎 HR and compliance gaps 🔎 Messy or incomplete contracts 🔎 Unclear financial adjustments or owner add-backs 🔎 Potential unresolved tax liabilities 🔎 Customer concentration risk 🔎 Unresolved litigation or contingent liabilities 🔎 Cap table confusion or unresolved equity promises These aren’t just technical details, they’re signals to the buyer, and in an M&A process, well-prepared diligence wins deals. What can sellers do? ✅ Assemble your own diligence checklist before buyers do. A good M&A advisor will help you do this during the preparation phase ✅ Have your financials reviewed or normalized by a third-party QofE provider ✅ Clean up contracts, org charts, cap tables, and compliance documentation ✅ Identify “gray area” risks early and prepare thoughtful explanations ✅ Think like a buyer, then remove any friction. Make it easy to buy your company. In diligence, the goal isn’t perfection, it’s being able to give the buyer confidence. When a buyer feels like you’ve done your homework, the dynamic shifts. You’re no longer defending surprises. You’re leading the deal with transparency and strengthening the value you’ve worked so hard to build. #mergersandacquisitions #Investmentbanking #MandA #exitplanning

Positioning for M&A isn’t transactional - it’s simply good business. Too many founders and boards treat M&A as an afterthought, a capitulation, or a means to a recently prioritized end. This reactive mindset is exactly what makes M&A hard- and why outcomes are often mediocre. But beyond that, positioning yourself for M&A early on is simply good business, regardless of whether or not you intend to sell. Think of it as earning buy-in from those with the power to shape your industry, not just your exit. Building trusted relationships, evangelizing your story, and gathering intel on incumbents and competitors are table stakes for top-decile CEOs. This strategic posture generates opportunity, goodwill, and momentum. Generating buy-in, especially when it results in being acquired for the value of your vision, not just your assets, requires strategic, not transactional, thinking. Here’s what that looks like: → You’re positioned early, not scrambling late. Engage when you hit the Traction Phase (I gave up on the Series letters a while ago). When your tech is de-risked and there’s early commercial validation, that’s the moment to start building trusted relationships. It takes years-and it compounds. → You’re wearing the CEO hat, not just the founder one. Founders are often emotional and insular about their business (a strength-until it’s not). A strong CEO brings emotional detachment and navigates M&A nuance. Let your sales warriors battle in the arena while you sharpen your diplomacy and connect with incumbents- even competitors. These ties often yield intel, partnerships, and other unexpected upside. → You’re doing BD yourself, not outsourcing. You can hire a BD lead (I once was that guy- story for another time), but you can’t outsource relationship gravity. Leaders want to deal with leaders. Understand your potential partner’s vision. Empathize. Seek alignment. That level of connection is reserved for expert CEOs. → You’re selling stories, not assets. Assets get asset pricing. Story and vision yield equity valuations. Work with investors and advisors who know how to shape narrative. Think Stradivarius, not violin. Or as Hany loves to say, sushi, not cold dead fish. → You’re building, not burning bridges. Arrogance in the ecosystem closes doors - often before you even know they exist - and invites schadenfreude. Humility and real relationship-building pay dividends. Karma’s a b*tch. Accomplishing this “bought” posture takes maturity and perspective. It means being real, staying curious, and stepping outside your comfort zone. Done right, and with the right warm intros, it’s both natural and rewarding. Helping my portfolio founders get there is one of the most gratifying parts of my job. Companies are bought, not sold. Great CEOs are magnets, not merchants. Connectedness and respect breed opportunity and optionality. Play the long game.

Startup exits used to take 4.6 years (in 2005). Now they can take 6–10. Many founders don't plan exits and lose leverage👇 Look, if you're waiting until year 10 to start conversations, you're already too late to influence valuation or deal structure. Because in this market, timing matters more than traction. Founders who exit well don’t get lucky. They time the process. Because from listing to closing, an exit takes 6–12 months on average. And that timeline depends on: ↳ Profitability and revenue trends ↳ Strategic buyer appetite in your space ↳ How replaceable are you in daily ops The earlier you start preparing, the better the outcome will be. So, founders who exit well: • Start mapping acquirers by year 5 • Build relationships 2–3 years before exit • Share metrics and vision long before they’re “ready to sell” There’s no way an exit will happen overnight. They need to be nurtured. If you want to improve your odds of a great outcome, do this: - Identify your exit window early (by year 5–6) - Send quarterly updates to strategic acquirers - Tighten key metrics (ARR, churn, LTV/CAC) - Track M&A activity in your segment - Keep your financials clean (can't stress enough) We’ve seen deals fall apart after the LOI because of: •Unclear IP ownership •Disorganized financials •Missing employment contracts Spend time understanding👇 Who are your buyers? What are they looking for? When do your multiples peak (usually before growth slows)? Don't wait 10 years to start considering the sale of your company. Start early. Pic Source: Matt Dallisson. -------- Our team at FE International has closed 1,500+ deals. And we’re more bullish than ever on the rise of internet-first (and now, AI-first) businesses. If you're a founder curious about your company’s true value, get a free valuation. (Link in comments) 👇