Chapter 22The Inside View from an Inbound Reach Out

The buck stops at the CEO/Founder. There is no one else at a company that has more power. So when she personally reaches out to you, either directly, or most likely through a proxy like your board member or investor, much deliberations have already been made to assess a possible acquisition of your company. Likely she'll jump right into business at the very first encounter, as her bandwidth is often very limited, and the acquisition will be extremely strategic to her current execution plan. When you get an inbound like this, take it very seriously and prepare to give direct answers on whether you are open to an acquisition and what the price tag you are looking for. Again do not give an answer on what the price tag is right off the bat, the right approach is to punt this later by saying that you would like to consult this with the board and run a due process to let the market dictate what the right price is. And if the interest is indeed genuine, in this case, it most likely is, the inquiring CEO/Founder should have no issues with it and could potentially preemptively provide a strong offer. It would be worthwhile to hire a banker to handle the negotiations and also to potentially gauge overall market interest to maximize the return for all the stakeholders.One caveat, if what you are working on is strategic to the acquiring company that their CEO/Founder is directly involved in the acquisition, chances are, she is also engaging with your competitors having similar conversations. So don't overplay your hand, if the opportunity makes sense and is signed off from your board, proactively engage with the founder and strike the iron while it's hot.

Sometimes the CEO is too busy or inexperienced in doing deals, and in such cases, she would delegate this over to a Board Member or Investor who is more experienced in M&As. This is the next best thing when it comes to actionability. The board member could also serve as a noise filter and make a recommendation back to the CEO after your initial meetings. Likely this Board Member will be quite involved throughout the process to help out with areas that the CEO delegated over. They could be negotiations of the terms, parts of the due diligence. Still expect the CEO to make the final decision on whether an acquisition will happen.

Typically in large companies, product executives at the VP or Director level have the autonomy to pursue acquisitions. These deals could still be quite lucrative as they likely will be strategic in nature, but could still require sign offs from senior executives in the C-suite. In such interactions, ask your point of contact whether she has done deals before, and who would be the final decision maker. Based on the answer, work towards a strategy to ensure that you are talking to the decision maker, and if she is new to doing this, that's usually a bad sign and most likely you'll have to convince folks upper up in the management chain in order to make sure a deal actually happens.

Engineering executives mainly engage with startups when there is an acquihire opportunity where they need to quickly fill-in headcounts that could not be easily hired externally. The deal sizes are typically smaller, and the interview process will be rigorous. They will ask you point blank on whether it's acceptable to you to abandon your current product and work on theirs. If that's something you are open to, the process will likely move quickly, and the key decision maker will just be the engineering executives. Again, confirm whether they have worked on such deals in the past, and ensure you are engaging with the final decision maker.

Sometimes acquiring companies also hire bankers to inquire potential acquisition targets about possible M&A deals. If the acquirer is specific about your company, likely they would have approached you directly or used a proxy. It's only in the case where they are looking for a company with a set of constraints, they offload that work over to a banker to identify and engage with companies that meet those constraints. The good thing here is if your product, services, tech or team fit the bill, then things could potentially move fairly quickly and you will be connected with the acquiring company executives. However, also understand that the inquiring bankers are talking to a number of companies, and also, because they are a proxy, they do not have the decision power, and the acquisition thesis could only become clear after the acquiring company executive did her due diligence on your company.

This is likely the least actionable engagement you will have, nevertheless, it's important to take such conversations seriously and build relationships. Typically what happens is that certain product organizations have a new initiative that they are inexperienced in and are looking to gather information. They would activate their Corp Dev or Analysts to do market research and probe companies in such space on insider knowledge like market size, customer discovery, technology gap, etc. Don't give out anything that is sensitive to your business when engaging in such conversations. Explicitly ask the purpose of these inquiries, and treat this as a learning opportunity to understand what the needs of the inquiring company have, and study for possibilities to strike up or be introduced to actual decision makers in the executive team for future conversations.