What Everest teaches makers and entrepreneurs about acquisitions

Published on

October 6th, 2021

Author

A fragmented market hurts entreprenurs seeking acquisition

I’ve built and sold three profitable businesses. That’s not a flex – just letting you know I’ve been there and endured the pain of the acquisition process.

My first acquisition was pretty small. I’d built a job board back in college and sold it for $100,000. Of course, that felt like a million dollars to a broke college student, but the real fortune came later.

That first acquisition gave me the seed money for my second business, Bizness Apps, which became phenomenally successful, hitting around $50 million ARR at its peak. As you might’ve guessed, I generated a lot of interest from VCs and private equity superstars.

I’d spent an exhausting decade building a multimillion-dollar success story and had been extraordinarily lucky to attract offers. Usually, you had to put the word out to investment bankers to let them know you’re open to conversations. That a buyer had found me was a relief few enjoy. I didn’t realize this until much later.

I discussed acquisitions with a few of them but didn’t go through with any until 2017 when I got the offer of my dreams. "This was it," I thought at the time: a life-changing acquisition at my fingertips.

I had an acquisition offer on the table that would mean never worrying about money again, and the freedom to move on to my next adventure. But the elation of getting acquired soured the moment I realized what the acquisition process entailed. I’d foolishly thought everything would be more or less tied up once I’d accepted the offer.

I hadn’t expected the weeks of due diligence, the need for legal and other advisors, or the difficulties in communicating the acquisition to my teams.

Picture it: You’ve got a fantastic acquisition offer on the table, with friendly terms from a buyer with a proven track record of delivering on their promises. Then, suddenly, you have over 600 due diligence questions to answer. You have legal documents to produce, sign, or share. A codebase to audit. And a million other things…

All while still growing your business and generating profits.

I’m surprised I didn’t lose all my hair back then (or have a nervous breakdown – I was already burned out by the time I accepted the offer). You might think, "Yes, but isn’t your first acquisition always the hardest?"

That’s what I thought, but my second and third were just as complicated. Yes, I knew what to expect, and that helped me make better decisions earlier on, but the process itself was still unbelievably difficult. Just look at all the touchpoints of an acquisition:

Due diligence
Accounting
Legal
Escrow
Taxation
Operations
Intellectual property
Employees and contractors
Valuations
Negotiations
Partners and vendors
And countless others

Imagine spinning all of these plates while continuing to operate your business.

You’ll discuss the acquisition with many different people, both internal and external, and interact with countless data sets, platforms, and communication channels to get to the finish line. This means an already complicated job – finding a buyer, agreeing on a price, passing due diligence, and transferring assets – is even more complicated because everything is so disconnected.

This fragmentation puts pressure on your ability (and, potentially, your desire) to sell your startup. How many entrepreneurs have lost deals because of oversights, misunderstandings, or an innocent mishandling of the process? How many held on for too long and couldn’t sell?

Time is important because the longer it takes to sell, the more exposed your business is to outside influences. An unexpected competitor or product entering the market or a shift in public opinion can slow or even break an acquisition.

In short, a fragmented acquisition market harms entrepreneurship and commercial diversity, which hobbles economies and lets only the biggest and most well-funded (not the same as profitable, by the way) survive.

We should celebrate life-changing acquisitions as much as funding rounds. And to do that, we need to enable serial entrepreneurship by consolidating the acquisition market.

Consolidating the acquisition market benefits makers & investors

Let’s return to that Everest analogy for a moment.

Sherpas live on or near the mountain during climbing season since that’s where the climbers are and where they’ll do the most business. In the high-altitude town of Namche Bazaar, otherwise known as the gateway to Everest, you’ll also find climbing supplies, from rope to crampons to dried yak meat.

While great for the local economy, this also gives aspiring summiteers the advantage of everything they need to climb the mountain in one place. Climbers needn’t travel from one side of Nepal to the other to find their guides or buy their equipment. They have everything they need to secure a successful ascent in one place.

Imagine you had the same when selling your startup – everything you need to get acquired consolidated into a single marketplace.

First, you have a community of buyers. You don’t need to hire an investment banker to find them for you. Instead, they’re already in-market and looking for their next opportunity, which could be your startup.

Then, you have a marketplace where you can share details about your startup with interested buyers. No need to respond to multiple emails or LinkedIn channels or any other mediums through which you might otherwise have met.

Finally, you have advisors – on everything from legal to valuations – available to help your startup get acquired quickly, easily, and at the highest price. No need to fret over taxation, paperwork, or whether the purchase agreement is legally watertight.

How might this change how you feel about acquisitions? Not daunted, I hope, but empowered. Rather than worry about the process, you can focus on operating your business and planning your next venture.

Acquisitions will always be a complicated legal process just as Everest will always be the world’s hardest climb. But having the tools and assistance to close your acquisition negates some of the stress and pressure, leaving you free to focus on what matters.

And what does matter? For me, I’ve always loved building profitable businesses.

Entrepreneurship has never been about a single contribution to society, but leveraging exits to fund greater and greater contributions. And serial entrepreneurship, as I’ve just described, celebrates achievements big and small, but importantly, results in iterative change.

Every innovation or solution helps us move forwards as a society. Acquisitions are a critical part of that cycle since they allow builders, scalers, and entrepreneurial all-rounders to leverage their achievements to achieve more, to contribute more.

When Edmund Hillary and Sherpa Tenzing Norgay climbed Everest’s peak in 1953, an altitude of over 29,000 feet, it was a personal and global victory.

It taught the world that we were capable of anything, with the right preparation, and inspired a new generation of climbers and explorers to aspire higher than ever before.

Let’s hope consolidating the acquisition market inspires the next generation of entrepreneurs to do the same.

Comments

Moshe Howell @moshehowell

When you're a private company, you can be nimble and take advantage of opportunities that might not be available to you if you were publicly traded. But when it comes to acquisitions, the process is often so complex that it can kill your appetite for them. I've been an entrepreneur for most of my career and have made several acquisitions myself. I've also had the opportunity to work with many companies that are thinking about buying another company. I have a long time experience of using https://domeanessay.com/edubirdie-com-personal-help-for-every-student-demand/ for relevant needs too. In both cases, I've seen how difficult it can be to acquire another company. It's not just finding the right target; it's also getting the deal done in a way that works for both parties and doesn't derail your own growth plans.

Sep 13, 2022