Selling my company was a long and arduous process. To continue the Disney analogies, it was like being the old guy in Up. I was fairly burned out and suddenly my house was caterwauling around attached to a ton of balloons and I needed to find a good landing spot for it. 

 

I was surprised when I set out to sell that there were very few guides to running an M&A process. Like raising venture, selling your company is a combination of sales pipeline and multi-player negotiation. Ever since I sold, founders have been reaching out asking how I did it (and why!) so I decided to write an inside scoop guide to help others in their journeys.

 

So here are my 12-steps to successfully selling your company:

 

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Step 1: Decide to sell

 

Deciding to sell is arguably the most challenging part of your journey. It can be heartbreaking. Your startup is your baby, but it’s your job as the founder to take care of your team and your investors when the time is right. So why did I decide to sell? My company was growing extremely fast pre-covid. We’d gone from approximately $20k to $250k of monthly revenue in our first year of doing corporate sales. The problem was that we were an in-person sales company. Suddenly, when Shelter-in-Place orders hit in February last year, everything ground to a halt. 

 

We could have continued going door-to-door but I did not want to be the company delivering covid in cute pink t-shirts. We pivoted a few times to sustain our team and had some revenue coming in, but I wasn’t enthusiastic enough about our pivots to keep building. More importantly, the fear was that if we raised more money at a lower valuation, I would dilute our investors and myself too much for it to be worth continuing. 

 

So when a potential acquirer came calling in the summer, I took the call.

 

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Step 2: Determine “who” is most likely to buy you

 

Before getting in too deep with the company that wanted to buy us, I knew that we needed to assemble a competitive process. I talk to so many founders who get one acquisition offer and then don’t shop it around. This is crazy! That’s like only meeting one man in your life and assuming that he’s the one you want to marry. You need your process to be competitive to get a decent exit (unless you’re huge and killing it in which case consider a SPAC). 

 

Before making a list of potential acquirers, start with a list of verticals that might want to acquire the tech, team, recurring revenue, audience or client list that you’ve built.

 

In our case we were an in-person sales technology company. We had 4 potential groups of companies that might want to buy us:

• Our clients (duh!)

• Our competitors

• Large marketing companies that wanted to build more personal relationships with their consumers

• Big tech co’s (these were our safety schools, i.e. our acquihire opportunities)

 

Pro Tip: If your company is going to be valued north of $100M, you should consider working with an investment banker. Bankers’ jobs are to match-make companies looking to get sold with companies looking to buy. They can keep your company anonymous in the earliest stages of M&A (think Love is Blind) and they’ll do much of the negotiation for you. That being said, the good ones are very expensive. They’ll want a monthly fee of $20k+ and 2-5% of the final deal price. We decided not to go down this path because we were too small to be worth the time of a top-tier i-banker and I wasn’t gonna give away equity for nothing.
 

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Step 3: Build “sales” materials

 

Similar to a fundraising deck, you will want a short salesy deck that tells potential acquirers who you are and why they should buy you. Think of this as your tinder bio- it should be short, sweet and clear about what you are looking for.

 

Our deck had 5 slides all with metrics reflecting our strongest attributes:
 

• Company Overview

• Technology

• Data

• Team

• Why working together might make sense (this was customized for every potential acquirer)

 

Also similar to a fundraise, you will need to compile high-level past financials + a projection of how much money you could make working together (this will come in handy in the negotiation phase!).

 

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Step 4: Make a list of potential acquirers

 

Based on the verticals you decided on in step two, make a list of potential acquirers. We looked for top company lists and focused on organizations with the most revenue that hadn’t done layoffs during covid.

 

Then we trolled Linkedin to see who in our network might be able to make an introduction to our potential acquirers’ CEOs, CFOs or CROs (we were a sales technology company so this was the highest job title that was relevant to our biz).

 

Pro Tip: Beware talking with Corp Dev too early as they generally get introduced to companies when a high-level stakeholder is already championing them, and often (but not always!) they are not the champions inside companies.

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Step 5: Start getting introductions

 

Here is an example email we sent to an introducer:

 

Hi [Name],

 

Thanks for connecting today. As discussed, it would be great to be connected with [Name] at [Company] to discuss Knoq and the process we're going through right now. I wouldn't have expected to be in an M&A process right now of course, but given the interest, I want to be thoughtful in how we proceed.

 

Here is a blurb you can forward: Knoq is a sales technology company that started in the door-to-door space. They work with companies like Google Fiber (telecommunications), Inspire Energy (clean energy), Clearway Energy (solar), Fluent (home security) and Orkin (pest control). Their technology has been used to have over 6 million sales conversations and they have built a data platform that helps door-to-door sales groups transition to digital, phones and direct mail outreach. Their data includes phone numbers, addresses, verified emails and algorithms that predict behavioral information and psychographic indicators.

 

Best wishes,

Kendall

 

Pro Tip: Don’t overshop a deal. An M&A process is delicate like a marriage- you don’t want to be dating too many folks. Start with ten introductions to test the waters and sprinkle in more as you go.

 

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Step 6: Initial Conversations

 

Your first call with potential acquirers will generally be scheduled for 30 minutes. This is a quick get-to-know-you chat where you can pitch yourself, your company and what you’re looking for in an exit opportunity.

 

If the person you’re talking to is interested, they’ll schedule another call right away to see your technology or talk with more people on your team. This stage of the M&A process moves fast and it’s important to keep potential acquirers feeling FOMO (fear of missing out). Doing this without lying is a delicate process. When acquirers ask how far along you are, you can say things like “we just started this process but there seems to be a lot of interest.” 

 

For us there was one company that led the charge so we were able to say, “we just started this process but one company has been pushing us fast. We want the best outcome, though, so we’ll take the time necessary to get to know you.”

 

After the first conversation, ask for an NDA.

 

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Step 7: M&A NDAs

 

If you’re talking to your clients about buying your company, you probably already have NDA’s in place with them. NDA’s for M&A are a different animal. When you go through an M&A process, you are showing your biggest competitors your technology, your customer books and the rest of your secrets.

 

Get a new NDA in place before the second conversation and definitely before any diligence. M&A NDAs protect potential acquirers from reverse engineering your tech and stealing your team. Can you imagine starting to go through this process and then every one of your competitors starts messaging your engineers saying “your CEO is selling come work for us”? Disaster.

 

Pro Tip: Get a real attorney to do this, not your cousin Jim. This is the part that you can really screw up.

 

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Step 8: Tech Demo (or another type of deep dive)

 

For us, most of our second conversations consisted of a tech demo and a deep dive brainstorm on how we could work together. These meetings generally took 1-2 hours and we would seed our technology with their data/use case if we could. 

 

Our team was used to doing tech demos so these went smoothly and we’d get folks pumped about what working together might look like.

If your company isn’t tech heavy this might be a deep dive into your production process, your marketing arm or your customer book. To get a good multiple, you need to prove in this conversation why what you’re doing is defensible and will make the acquirer a lot of money.

 

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Step 9: Pilot

 

Most of our customers had been as hurt by covid as we had, so they weren’t serious contenders in our M&A process. Therefore our potential acquirers hadn’t used our tech before and they were excited to give it a whirl. The first group that had contacted us we let do a pilot for free, but it was a lot of work, and we had a fair number of groups interested, so for all the subsequent pilots, we charged our standard pilot rate: $10k upfront.

You of course don’t need to do pilots, but it helped us prove how unique and valuable our tech was. This dragged out our acquisition process but it showed potential acquirers that we weren’t looking for an acquihire, instead we were a serious tech company looking for a worthwhile deal.