Identifying Target Acquirers 101
So you have already clearly defined who you are as a company and what you do, you may already have a kickass product, but have you REALLY thought about your exit strategy? For those of you out there thinking that an acquisition is your likely strategy, there is one question you should begin to define: Who are your best targets for an acquisition?
This is the multi-million dollar question (literally…). And it should not just include the typical “Google” and “Amazon” answers. There are a ton of mid-sized and even smaller players that are a boatload more likely and potentially favorable for your particular company when it comes to executing a successful exit.
Starting Out, Target I.D. 101:
The absolute best place to start (in my opinion) is to find the relevant Gartner’s Magic Quadrant for your particular industry, sub-market, or vision of your company i.e. if you have a point solution that does one thing within the entire ecosystem of online marketing then try looking at the bigger picture players and find Gartner’s Magic Quadrant for end-to-end marketing automation platforms.
Evaluate the players in each of the 4 sections (Challengers, Leaders, Niche Players, and Visionaries) of the quadrant. Each section allows you to better understand where each company is in terms of the completeness of their vision and ability to execute.
The approach and position you take when you inevitably have conversations with these potential acquirers can be drastically different based on their market positions:
Typically less innovative, play up your ground breaking product or service as a competitive differentiator that will catapult them into a Leadership position when pitching these types of companies.
Already the big guys on the block. Typically these ones are going to be the most difficult to get through to unless you have an in and or are already pretty big as a company yourself. If you are truly innovative and different and have a product that already has a large footprint you will be on their radar. These companies want to either buy more market share from more established or validated companies or build it on their own (they have the resources and market position already to do so). Traditionally (but not ALWAYS), they are less inclined to spend their time on a small 3 person sub $2M company unless it’s an acqui-hire.
Can be a no-brainer if you too have a solution that caters to their same niche or can be optimized to cater towards a particular industry in a more technologically advanced way (these companies typically are not known for being particularly innovative). Or, another approach could be to talk to them about broadening their strategy and getting into new markets by leveraging what you have to offer.
These companies usually (not always) are some of the newer more innovative companies in the market that are making a splash. They are fast moving and growing like crazy, but sometimes lack the time and the resources to execute properly or consistently. Being the next big thing or providing cadence to their caos are key approaches to chatting with these types of groundbreaking companies.
Begin to evaluate each of these companies in the relevant Magic Quadrants, write them down, and create notes for why they may be great fits for a potential acquisition or partnership. Continue to maintain this list and re-evaluate at least every year.
Chief Analyst @ InvestVR
COO @ ARVRUS