A life poorly lived is a trap
Go for it at least once
— Jason ✨Be Kind✨ Lemkin (@jasonlk) May 5, 2023
Acquisitions are rarer in tougher times. Everyone just gets more conservative, even the biggest players. But if you stay in the game, get past $10m-$20m ARR, and do something important — in my experience at least, in SaaS, you’ll likely eventually get some sort of M&A offer.
A few more existential thoughts & learnings if do you get an offer to buy your start-up:
1. The “quality”/brand of the acquirer is less important than we tend to think. Selling is selling. It’s not yours anymore. I know it may sound appealing to “Continue Your Vision Inside of Google” or “Go 1000x Bigger Inside of Apple” or whatever, but even if it’s true at some level, it doesn’t matter in the end, 2-3-4 years down the road. Selling to Google, in the end, isn’t more glamorous or better than selling to Waste Management, Inc. for the same amount of money, not in the end, not really. For most founders, the rewarding part ends about 90 days after you sell, no matter to whom. No doubt it is better to see it flourish in the hands of a leading tech company. But still, this will matter less over time than you think. Google 10 years from now will have very different tactics (if not strategy) than Google today.
2. True, bona fide, binding offers aren’t quite as common as you’d think (and as the media suggests). Buying a company is a big deal. It takes a lot of political capital and drama on the part of the acquirer. You’ll get a lot more soft offers than firm ones, and more What If offers than signed, binding term sheets. Just because a CEO or SVP at an acquirer talks to you about acquiring you, doesn’t mean it will really happen. In fact, they may be saying the exact same thing to your competitor(s).
3. Corporate Priorities change every year, so if you say No, mean it. Both CEOs and SVPs move on. See, e.g., Microsoft and Yahoo! from back in the day. Say no, by all means. But if you do, don’t expect a better, or really, another, offer next year in most cases. They’ll be on to Virtual Goggles or Group Texting rather than Snapping. You really think Microsoft would have bought Yammer just a few years later? Maybe. But history suggests otherwise.
e.g., this CEO of SAP no longer works at SAP 🙂
Would they have acquired Qualtrics today? Unlikely with a different CEO running SAP.
4. If You Have Something Good, maybe don’t sell. Just because you only have so many at-bats. Especially if what you have isn’t faddy, or subject to large disruption risk. Because in 12-24-36 months, you’ll just be so much bigger, better, and stronger. Especially given the incredible growth of the Cloud.
5. Your Product May Well Slowly Die, at least of Neglect, If you Don’t Help it Survive Post-Acquisition. Most acquisitions fail. If you sell, and you don’t fight to make it survive the first 24 months after the acquisition, your product will probably disappear. Who else will really care that much? 99% of the folks involved are already on to the next acquisition.
And finally, just remember M&A is quirky, and hard. Take a watch of our convo below with Ben Chestnut, CEO of Mailchimp. Their $12B acquisition with Intuit not only took a year, but really only came about when another deal … fell apart.
(note: an updated SaaStr Classic answer)