Chapter 27Second Meetings Are When Things Get Real

Most M&A-themed conversations do not get beyond the first meeting, so if indeed a subsequent meeting gets scheduled, it is a huge deal. The stakes just get higher and higher starting at this point. Even if the other party were a competitor trying to get the lay of the land about your company, typically they would simply request some materials after the initial meeting and ghost you afterwards. And if you are speaking to big tech companies, typically getting all the stakeholders in the same room requires a ton of coordination and weeks in advance for the scheduling, so unless there is something actionable, a meeting would not be scheduled.

A bunch of additional materials may be requested from the potential acquirer before making a decision on whether a second meeting is warranted. They include, and are not limited to, prior fundraising and valuation documents, an org chart along with a roster that describes each employee’s role as well as prior experience, company P&L statements from the last three years, product growth and retention metrics, product roadmaps, technology stack, overall architecture amongst others. Some may even request access to your data room at this point. Before handing shipping these materials off, be sure to execute a mutual NDA from the acquirer. It is typically better to request the NDA from the acquiring company side and make suggestions to that as opposed to requesting one from your lawyer. This ensures the process has less back and forth, and you can get to the meat of the discussion without spending weeks of negotiations over an NDA term. Be liberal when it comes to providing supporting docs once the NDA is signed, withholding requested info could lead to the potential buyer losing interest or misinterpreting you as being not serious about the deal. The fact of the matter is, the advantage is always on the buyer in terms of having an information asymmetry.

As an aside, if the potential buyer is eager to share their financial statements, forecast or future roadmap this early on in the process, this actually spells as a red flag as they are more desperate to complete this deal than you are. You are in a great situation if they are rich in cash or have great future prospects like an imminent IPO or funding round. However, more often than not, the reason why the potential buyer is eager to share all this info at this stage unsolicited could mean that they are desperate to complete a deal for the sake of doing a deal (the board has given a directive to expand to a certain sector, or in order to raise funding they need an acquisition in your space), or in the worst case scenario, they are looking to do a rollup, where they issue you a bunch of private stocks in the hopes of absorbing your revenue and cash balance.

So, at this point, expect the actual decision maker to be present in the meeting, as well as those whose input would matter for this M&A subject. If it is a highly strategic acquisition, expect a C-level officer to be part of the conversation along with her lieutenants, most likely one of the lieutenants will end up driving the conversation on at this point if you are engaging with a big company. Typically, the way to gauge that is if the acquiring company has a head count ten times or more that of yours, then a lieutenant (typically a VP of product) would manage the process, and if the acquiring company is not ten times bigger, then typically the CEO herself or COO or CPO would be your direct point of contact. In other cases, if the acquiring company is one of the magnificent seven or equivalent large cap tech companies, you will be working with a Director of VP who is likely to be the person absorbing your company into her org.

Expect the corp dev to play a secondary role starting at this point. Depending on the seniority of the attendees from the other party, the conversation will be highly strategic and forward-looking at one end of the spectrum if the C-suite executive is in attendance, while tactical and deep on the implementation side if the most senior ranking people are engineering or product managers. Treat this just like a highly technical job interview, everything is fair game. Company metrics, customer personas, user journey, user interviews, UI/UX, positioning can all be asked from the product side. Technology stack, engineering tradeoffs, implementation details, specific usage of a framework can be inquired from the engineering side.

Ask for an agenda in advance to prepare for this call, and spend ample time to prepare and practice for this high level due diligence. Figure out beforehand between your cofounders who will field which questions, and make sure everybody gets a chance to present if there is a presentation portion. It is not a great sign when only one person speaks during this meeting.

Questions from the potential buyer could become more pointed at this point regarding deal expectations, again, refer to the previous chapter and punt this over to your board. The goal again is to maximize information exchange, and ideally line up all the M&A conversations so that offers are made around the same time, or at least enough conversations are already had, so that when an offer is made, other companies are in a position where they have what they needed to also make a competing offer.

There likely would also be a myriad of questions outside of financial expectations, focusing on human elements and operational alignment. Expect questions about product discontinuation or rebranding, and detailed inquiries about your team's strengths and dynamics. Try to avoid aggressive responses that paint you as someone who is difficult to work with or overly attached to your company and ego. Conversely, submissive responses can be misinterpreted as you are desperate to sell and lack vision. These questions assess your adaptability and leadership as a future partner. Be yourself, be authentic, thoughtful, and focus on a mutually beneficial future for a successful outcome.

The meeting typically ends with the buyer asking for a few days to huddle and sync up on their thoughts before discussing the next steps. If everything goes well, there will be a meeting scheduled to discuss financial expectations in parallel with a formal due diligence process. This typically will happen very quickly. It could even happen at the end of the meeting if the buyer is super motivated.

You may be asked for more supporting materials right after the meeting. Most likely the data room will be requested at this point if it hasn’t been already.

If you don’t get a response within a couple days, however, likely you will not hear anything back for weeks, or it could be some vague response like certain folks are on vacation, they remain excited about the opportunity, but please stay patient. Normally a decision is made right after the meeting and tasks are set in motion if the potential buyer would like to proceed further. If a consensus cannot be reached, or the consensus is a ‘no’, then typically the internal champion from the buy side would take the action item to inform you of their decision. However, there is no longer an urgency on their side to inform you this and this task gets deprioritized to the bottom of her list, hence you won’t hear back for weeks or at all even with persistent pings.