Build buyer relationships (long) before you need them

Would you marry a stranger? Me neither. Often though, that’s what we expect when it comes to selling our startups. We expect to just approach buyers that we have no prior relationship with and have them get excited and buy the company. It can happen, but it likely won’t.

The track record for M & A success is spotty at best. Prevailing wisdom says about 1/2 of deals work (meaning they achieve their objectives and generate a return for buyers). On a value creation basis, the ratio is much higher. The value created by successful acquisitions significantly outweighs the value lost in failed ones. That’s why companies continue to buy companies. But going in to a potential deal, you just don’t know for sure if this one is going to work.

With that in mind, CEOs must build relationships with potential buyers long before they need them. I recommend that CEOs meet with their most natural acquirers quarterly. You could leverage corporate development teams to help you navigate internally. You can work directly with product, marketing and BD teams.

Even if you have no intention of selling, it’s important to build the relationships. If nothing else it gives you optionality. Over 90% of exits are acquisitions. Even if you don’t want to sell, on a probability basis, you will.

Relationship building even extends to knowing your competitors. I’m not suggesting you disclose confidential plans and results to your competition. I am suggesting that you know each other.

If you decide it’s time to sell your business or time to even explore the possibility, it’s best to begin that process with a set of warm, existing relationships. Ideally with buyers with whom you already partner. Partnerships with proof points, joint customers, etc. That way, you won’t be looking for a stranger to marry you.