Who are the natural strategic acquirers for the typical SaaS product? How many viable acquirors are there?

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JASON LEMKIN

There are more potential acquirers than you think … but the odds are far lower that an “obvious” candidate will ever buy you than you think.

Let’s break this apart.

First, the “obvious” guys. That Salesforce, Google, Facebook, whomever will buy you.

Well, here’s what I learned on both sides of those sorts of deals (as a VP at an acquirer and CEO/founder of 3x acquiree) … the “list” is both obvious … and odd.

What I mean is yes, there are always 2–3 companies a BigCompany really truly 100.0000% wants to buy. Instagram, then Snapchat, then WhatsApp were clearly on Mark Zuckerberg’s Must Buy list. He got 2/3 of them.

But … beyond that, there are 1000 other applications that it would make 100% logical sense to acquire to an outsider. That any given acquirer isn’t remotely interested in buying.

And … the priority list changes. Sometimes annually. Sometimes less often. But it changes.

So one thing I’ve leaned is that for every CEO of an acquisitive company of scale, and every SVP below her level that has potential authority to drive an acquisition — there is a list of 5–10 candidates. That’s about it.

Some of those are the obvious ones, to insiders and outsiders. And some of those will surprise you.

And the other 990 out of the 1000 that make logical sense?

Not even on the list, folks.

So … the Bad News is there’s statistically a very high chance your most logically acquirers, even with the world’s best product fit, won’t ever want to buy you. You just don’t make the Top 10 Priorities List for either the CEO or the key SVP related to your product.

But … the Good News is that as SaaS’s footprint has expanded 100x in the past 10 years, there will be more and more potential acquirers. Today, Salesforce, Workday and ServiceNow are the only companies big enough to write a large M&A check. Zendesk, Slack, Intercom, Talkdesk and many others could join that list in just a few years. And beyond SaaS per se, we’ll see a lot more “Cruise”-type acquisitions in the coming years (GM bought Cruise for $1.25b) where non-SaaS companies pay big company to buy SaaS companies. That will expand the acquirer list once again.

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Published on May 29, 2016
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