How Leaders Can Build Acquisition-Ready Companies Leaders play a crucial role in preparing their companies for potential acquisition, particularly in the tech industry. They must start implementing strategies to make their organizations attractive for M&A opportunities.
By Cara Sloman Edited by Micah Zimmerman
Key Takeaways
- Strategic partnerships and market positioning are crucial for acquisition readiness.
- Effective communication and leadership are key to M&A success strategies.
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An exit strategy is crucial for businesses, especially in the current economic climate. In 2023, merger and acquisition (M&A) activity declined due to rising interest rates and uncertainty surrounding geopolitical events. So, for 2024, Morgan Stanley Research forecasts a 50% increase in deal volumes over last year. Why the change? Morgan Stanley cited increasing business confidence and positive global economic news.
Signs show that M&A activity is on the rise. In H1 2024, total global M&A deals are valued at $425 billion. And the volume of M&A activity rose 130% year-over-year in Q1 2024. While deciding whether to pursue an acquisition or a growth strategy depends on a company's goals, priorities and unique circumstances, getting acquired is an attractive prospect for several reasons. Among them:
- A quicker return on investment
- Freedom from the uncertainty and risks of trying to scale the company on your own
- Accelerated growth beyond what was possible as an independent entity
- More market traction with access to a larger customer base, distribution channels and market presence
Getting to this level takes the right approach. By focusing on profitability, gaining market share and brand awareness, developing the right strategic partnerships, and creating the maximum value for your customers for brand and customer loyalty, you can put your company in a very attractive position for potential acquisition.
Before taking this step, it's important to understand the nuances of language. The messaging that supports acquisition is very different from that used for sales or media relations. Acquisition messaging must focus on market opportunity, intellectual property, differentiators, company vision, your leadership team and validated market share.
Getting started
There are many different forms of performance metrics to highlight your business's success and stability, including market share, profitability, strategic technology partner integrations, customer satisfaction, brand loyalty and share of voice.
Market share metrics can come from leading industry analysts. Analyst relations is an important aspect of an integrated marketing plan. Analysts provide quantitative and qualitative third-party validation; their metrics can help demonstrate your traction and differentiators. You should consistently weave them into your messaging.
Akin to market share is share of voice. This measures the visibility of earned media coverage in the competitive landscape and is important to demonstrate that your company is leading and shaping the industry conversation. Additionally, surveys can help you measure customer satisfaction and brand loyalty.
Joint marketing programs with strategic partners help not only bolster visibility but can also be the conduit for successful M&A. If you can show how your offering fills a gap in their portfolio and helps them compete and bring a few deals to the table, you are effectively putting your company on their acquisition radar.
Perfect your messaging, then work with experts. Start by having a clear message and communicating consistently across all marketing channels, including your website, media engagements, press releases, analyst relations, thought leadership and social media communications.
Then, you can begin weaving in your experts. Cultivating champions with industry pundits through a dedicated industry analyst relations program can positively influence market perception and help set the stage for a successful exit.
As mentioned previously, analysts and other third-party influencers are torch bearers who can validate your market share, espouse your technological differentiators and show how your product or service is benefiting customers with credibility that goes far beyond just saying it yourself. This includes the third-party credibility of positive positioning in the right market research reports and the ongoing direct conversations they have with their clients every day about which vendors to consider.
Your executive bench of company spokespeople plays a big role in getting the message out to the market through paid, earned and owned media. This includes communicating the vision, your differentiators, your go-to-market strategy, your strategic partnership direction, and what sets you apart from other players in the industry.
Transparency is key from the beginning. Do not underestimate the due diligence process. Make sure to address common pitfalls. Warning signs that warrant direct communication could include the company's financials, overall performance, customer and partner relationships, employee retention and legal problems.
Start preparing now
An exit strategy should be part of your business plan from the start. With an end goal in mind, you can create a roadmap for how to get there. This helps crystallize your vision regarding the goal and focus targets for your business. You define success by providing the end goal that your team can work towards with a timeframe and milestones.
Keep trends in mind. Identifying and analyzing big trends that drive changes and shape the industry is essential for any business to stay ahead in a constantly evolving market landscape. These trends can include economic factors (such as inflation, interest rates, and GDP growth), regulatory factors or environmental factors.
With a solid grasp of the industry topics driving customer adoption and venture capital or private equity funding, you can make informed decisions about where to focus your business strategy, product/service development, sales and marketing efforts.
One example of a recent trend was the surge in cybersecurity M&A and funding driven by the shift to remote work. Cybersecurity is a cornerstone of business continuity and resilience in today's digitally connected world. The cybersecurity landscape is experiencing significant growth in mergers and acquisitions.
Fifteen cybersecurity-related M&A deals, including some big transactions, were announced in the first half of May 2024 alone. Through M&A, these companies are consolidating to enhance their security portfolio to provide more end-to-end solutions. This strengthens market presence, helps them compete and attracts a broader customer base.
Related: From Growth to Profitable Exit — Actionable Strategies As You Sell Your Business
Leading the way to the exit
Leadership plays a pivotal role in cultivating a company that is ripe for acquisition. Leaders, especially those within the tech space, need to begin implementing strategies and tactics that make their organizations appealing for potential M&A opportunities. Focus on creating value and stay on top of industry trends; this includes gauging the valuations of other companies in your space. And don't forget that effective marketing communications is a cornerstone of M&A success. Work with internal and external experts to ensure that your unique value proposition is clear and widely known.
