Chapter 28Should You Run an Official Process?
In M&A terms, an official process typically means setting a timeline and reaching out to all likely buyers and soliciting interests/offers. However, it only makes sense to do them in two particular scenarios, let's look at them.
1. Firesale
One type means the founder or a banker sending out an email merge to a mass list of email addresses of chief executives and corp devs soliciting a request for interest with a deadline that includes a blurb about the company looking to get acquired. This email includes a short presentation about the company on the financials, governance, personnel and technology, and some inexperienced bankers or founders would even include a line or two about the company having fictional strong interest in the market from other potential buyers or even blatantly lying about having offers.
The truth of the matter is, if indeed there is an actionable offer for this company, the founder would be wise to be strategic and pick only a handful of companies that would be interested in putting in an offer. And with that, the email will lean heavily on prior relationships and utilize strong introductions if the relationship is weak. It wouldn't be sent via a mail merge. Plus, if there is strong interest already, why purposely put your company in a weaker position by broadcasting that you are soliciting offers.
This is usually done when a company is running out of cash or the founders have decided to quit. If you are in this position, you are looking to get any offer in the hopes of softlanding the company. It would take a miracle to actually get an offer from this exercise, and my recommendation is, unless you are already prepared to shut everything down, then do not do this.
The most likely outcome is radio silence from all your recipients with an occasional "thanks, but no thanks".
2. Bidding War
On the other extreme, if you are approached by more than one strategic acquirer with an unsolicited offer that you cannot refuse and a light due diligence requirement, this is the perfect time to hire a banker and run a process. The banker would be very selective to run analysis on companies that are either in or adjacent to your space and also having the bankroll to outbid your existing offer. Based on my conversations with founders who were in similar situations, they all appreciated having a banker who managed a process. In the case of Wattpad, Allen Lau the CEO hired Raine as their banker when they received their first offer. Raine was able to discover two other companies that were put in offers and all three offers all arrived at nearly the same price in the end.
Now unless you are in either situation, my recommendation is do not run a process. This is because by setting an artificial timeline, you are forcing acquiring companies to make a decision on whether to pursue an acquisition. This should only be done when you have leverage, and given that the first scenario will likely end up in a trainwreck regardless, it's best to discover without a timeline on whether you have that leverage or not. Plus, no executive would feel comfortable engaging in M&A conversations without adequately knowing and trusting you and the company for a long time horizon. Hence, stay patient and spend the time to engage in the conversations individually, do not set a deadline, and let the interactions grow organically and do not apply pressure until later in the conversations.