Startups aiming for accelerated growth often have several important objectives and tools to achieve them. One of them is gaining market share and increasing the speed of product offerings. One way to achieve these objectives is through M&As, or company acquisitions.
For an M&A to be successful, it's essential to start by answering some key questions. Why undertake a merger and acquisition? How does it meet the company's objectives and strategies? Is this the right time to take this step? Can I ensure my house is in order to undergo this expansion? What will I need to do to ensure a successful integration of systems and teams? All of this requires a lot of homework.
External pressure also plays a significant role. Investors often have high expectations and demand quick results, which can add an additional layer of complexity to M&As.
According to a survey by ACE Ventures, which interviewed over 200 startup entrepreneurs, 571% of respondents plan to sell or merge with other companies in the next five years, demonstrating how this strategy remains a priority in the market. In any case, the current situation continues to focus on operational efficiency, resource conservation, and the relentless pursuit of solutions and technologies, the most sought-after being artificial intelligence. Here, the question also arises: should I follow this market trend, or does my business have other urgent needs and opportunities? Do we have more fundamental needs to address before incorporating AI into our business?
Once the company's business priorities and strategies have been defined, it's time to assess the current situation. To begin, it's worth remembering that one of the worst times to undertake an M&A is when the company is doing poorly, and the merger and acquisition is seen as a lifeline. It's like having a domestic economy in crisis and bringing in another family to share the house. Buying a new company brings new employees, culture, products, and several factors that need to be balanced in an already complicated situation.
A good scenario for an M&A is just before the "cash surplus" phase. The company is in a relatively stable financial position but sees an opportunity to further improve its situation before reaching a financial peak. This allows the company to take full advantage of the acquisition, investing strategically to grow and expand its operations.
Beyond the economics, the decision must align with the Go-to-Market (GTM) strategy—the company's strategy for integrating the acquired company's new products, services, or markets into its business model. Because it's a bold move, it can require significant investment. But when done correctly, it positions the company ahead of its competitors, enabling accelerated growth and new market opportunities.
In some situations, waiting for risks to dissipate before making a decision can result in missing out on a valuable opportunity. In the context of M&As, a company may hesitate to close a deal due to uncertainty or perceived risks, but this hesitation can open the door for competitors to capture the opportunity first.
Before making the final decision, don't underestimate the importance of thorough and comprehensive due diligence. This process is the backbone of any successful merger or acquisition transaction. Any time invested in thoroughly evaluating the financial, legal, operational, and cultural aspects of the target company is well spent. Rigorous due diligence not only protects the investment but also provides the clarity needed to make informed strategic decisions, significantly increasing the chances of a smooth integration, and leveraging sustainable long-term growth.
Regarding the merger phase, recognized as a major reality check and the biggest challenge of M&As, the advice is to plan well, delegating clear tasks to C-suites, while never forgetting to prioritize and retain talent. Acquiring companies and technologies is just the beginning. Prioritizing the integration of people and leadership is key here, as they are the ones who make innovation happen. Ultimately, the game requires a bit of risk, a lot of preparation, a clean house, dialogue with stakeholders, and an understanding of how to merge and strengthen corporate cultures and diverse talent.
