Let’s face it, even the most streamlined acquisition processes take time. Yes, even if you cash out. And your relationship with the acquirer starts well before the actual deal. So goodwill is key, and both parties need to establish effective communication channels and foster mutual trust to ensure a smooth and successful transaction. There are a few ways that help sellers stand out during the process, and buyers make the right decision and build a truly strong partnership. From prompt and accurate metric responses to cultivating goodwill, it can help both buyers and sellers navigate the complexities of the acquisition journey and achieve their desired outcomes. 5 Green Flags for Acquirers During an Acquisition: 1: You can answer the basic metric questions right away On the first buyer call, you’re going to be asked about some specific metrics. And it looks good if you have them right away. It shows that you thought this through and came prepared. If you can’t answer those right away, it could create a perception of a lack of organization, and that reflects on the business values. 2: Your team knows about the exit Sure, sometimes you’re not even certain someone will buy the business. It can be scary to bring that uncertainty into the team because they’ll start questioning their future in the company. But it also shows that there’s trust in the team and that you want to include them in the process to get the most out of it. 3: You’ve been delegating your duties and making yourself obsolete This point grows from the previous one. You told your team what was going on, and you hired/promoted someone to slowly take over your duties. This can make the founder’s exit so much smoother and less painful for the whole company. 4: You share your expectations right away Due diligence is a two-way street during the acquisition. It’s great when you come to the call prepared, knowing that your goals, your vision, and your culture align with the acquiring company. You should have an idea of what you’re trying to get out of the deal, how you want it structured, and what you’re ready to do to make it happen. 5: You’re building a goodwill Acquisitions can take time, you may have a few potential buyers approach you, or you just want to see what the deal could look like at the beginning. It’s all just fine if you’re ready to build trust and goodwill. Even if you want to jump off all cash asap, the deal itself and the integration will take long enough to become unbearable if there’s no goodwill. Make an effort to build a healthy relationship with your buyer. These green flags may sound easy and intuitive, but preparing for the process and actually ticking through them may help you mentally prepare for due diligence and show buyers your commitment to a successful acquisition. While the way you present the information is important, you may also want to have an idea of what acquirers may ask about. Trying to stand out and providing comprehensive and insightful data during initial communications with acquirers can increase your chances of closing the deal more smoothly and even getting a stronger valuation. During the initial calls with the seller, acquirers are looking for several key factors that can help them assess the potential of the acquisition. Here Are Some Other Important Ways for Sellers to Stand Out and Present Relevant Information to the Acquirer: Your product can be exceptionally good and have a certain success rate, but acquirers usually buy companies to see them go even further and be profitable for many years to come. Demonstrated Growth Potential: So giving them an understanding of the market opportunity, revenue growth, customer base, and any unique selling propositions is crucial. Sellers should highlight their market position, competitive advantage, and future growth strategies. In some cases, PEs buy products that can remain standalone. In other cases, they can be looking for opportunities to get synergistic benefits from the acquisition. Scalability and Synergies: Sellers can differentiate themselves by showcasing how their business can be integrated into the acquirer's operations, resulting in cost savings, revenue enhancement, or other strategic advantages. If you identify potential synergies and articulate how the combination of the two entities can create value greater than the sum of their parts, it can give you an amazing advantage and showcase your deep understanding of what your acquirers are doing, too. If you’ve got valuable intellectual property, such as patents, trademarks, or proprietary technology, it can significantly enhance your company’s attractiveness to acquirers. Strong Intellectual Property (IP) Portfolio: Definitely highlight your IP assets and demonstrate how they contribute to a competitive advantage or barriers to entry in the market. Getting a product with a strong and passionate team is a hundred times more valuable than getting just code. People shape companies, and it’s your job to showcase the capabilities and experience of the team. Don’t just mention them on a high level; go full-in. Solid Management Team: Introduce your key executives, highlight their expertise and achievements, and demonstrate a strong succession plan. Sellers who have already implemented a management transition process get super points! Probably the most obvious metric to look into is the financials. Acquirers need to assess the company’s health and potential return on investment. Get your financial statements updated if you haven’t already. Clear Financial Performance: They should include revenue, profitability, cash flow, and key financial ratios. But don’t go too far; understand the metrics that make sense for the acquirers in your industry, and double down on making sure those are on point. During the initial calls, sellers can expect a range of questions from acquirers. Here are some examples: What has been your company's revenue growth rate over the past few years? Can you provide details about your customer acquisition cost and customer retention rate? What is the breakdown of your revenue by product or service offerings? How does your company differentiate itself from competitors? What is the composition of your customer base in terms of demographics and industries? Do you have any intellectual property or patents that provide a competitive advantage? Can you share your company's financial projections for the next three to five years? What are the key risks and challenges that your company faces in the market? The acquisition landscape is pretty competitive, and standing out from the crowd is crucial if you want to get the attention and interest of potential acquirers. Coming to due diligence prepared and knowing what you’re about to be asked and how to answer better can make a world of difference. Initial communication is the foundation of your (hopefully) long-lasting and trustworthy relationship. From addressing basic metrics promptly and involving the team in the acquisition process to articulating clear expectations and building a foundation of goodwill, there are many ways that sellers can set themselves apart. By adopting these better practices, you’re increasing your chances of forging strong relationships with acquirers and achieving successful outcomes in the acquisition journey.

This story contains new, firsthand information uncovered by the writer.

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