Top 10 Lessons on the Reality of Acquisitions from Former Head of M&A at Own – SaaStr

In the world of M&A, few have as much experience as Steve Mitzenmacher. With over 20 years of acquiring startups under his belt, he has worked at prestigious companies such as Yahoo!, NetApp, Rackspace, and Own Backup, which was eventually acquired for a whopping $1.9 billion. This journey has given him unique insights into the intricacies of acquisitions, and he graciously shared some of his top lessons during a recent discussion.

One key takeaway was that BigCos rarely approach startups “out of the blue” for an acquisition. Building relationships early on is crucial, as companies prefer to have some familiarity with the founders before initiating a buyout. Mitzenmacher emphasized the importance of nurturing these connections to increase the likelihood of a successful acquisition.

Another valuable lesson highlighted by Mitzenmacher was the significance of making decisions in M&A negotiations. If a startup declines an offer, the chances of the BigCo returning with a better deal are slim. This underlines the importance of carefully evaluating and responding to acquisition offers to avoid missing out on potential opportunities.

When it comes to the negotiation process, Mitzenmacher advised that startups should be strategic in their counteroffers. While it’s acceptable to push back on price once or twice, continuous back-and-forth can lead to dissatisfaction on the BigCo’s end. By limiting the number of counteroffers, startups can maintain a positive negotiation dynamic and increase their chances of securing a favorable deal.

Mitzenmacher also shed light on the competitive nature of acquisitions, emphasizing that BigCos always have backup options in mind. Even if a startup rejects an offer, the acquirer may consider other potential targets, highlighting the need for startups to remain competitive and valuable in the eyes of potential buyers.

Furthermore, Mitzenmacher revealed that BigCos often maintain a list of preferred acquisition targets. To increase their chances of being acquired, startups must actively cultivate relationships with key players in the industry and position themselves as desirable assets for acquisition. By proactively engaging with potential acquirers, startups can ensure that they remain on the radar for future opportunities.

In times of financial strain, Mitzenmacher encouraged startups to consider selling their companies, even if the returns may not be optimal. He emphasized that reaching out to potential buyers can lead to beneficial outcomes, regardless of the financial circumstances. By being transparent about their situation and engaging with industry contacts, startups can explore acquisition opportunities that may not have been possible otherwise.

Throughout the acquisition process, Mitzenmacher highlighted the importance of taking care of the team. Key team members should be identified and included in discussions early on to ensure a smooth transition post-acquisition. By prioritizing the well-being of employees and communicating openly with them, startups can foster a positive and productive work environment during the acquisition process.

In conclusion, Mitzenmacher emphasized the complex and arduous nature of the M&A process. While acquisitions can be challenging, he stressed the importance of staying organized and prepared to navigate potential obstacles. By following these key learnings and approaching acquisitions strategically, startups can increase their chances of success in the ever-evolving landscape of mergers and acquisitions.