A NDA to a LOI: What really transpires when your startup gets bought out?

Yair Snir is Dell Technologies Capital’s vice president and managing director for Europe and Israel.

A typical acquisition procedure may be summarised as follows:

Both planned and opportunistic acquisition strategies exist. Opportunistic processes take place when a buyer seizes an opportunity presented by an existing firm and proceeds to sell it to another party.

First, a good list of possible acquirers must be compiled, as discussed in Part 1 of this series. As soon as that happens, it’s a mad dash to get letters of intent from those interested buyers.

The next step is due diligence, which may take anything from a few days to a few weeks. Once the sale is finalised, you’ll begin the process of integrating the newly acquired company.

The frenzied buying spree

When a potential acquirer sees an opportunity, they contact the firm they want to purchase.

There is a brief window of time in which you may contact other organisations on your list of possible acquirers if you have been contacted and decide to pursue an acquisition.

During your first meeting with the buyer, you may understand how much they are willing to pay, as well as establish a framework for the negotiation.

The timing is within your control in a planned process, but you must consider a triggering event at your company that places time-bound pressure on the process.

To initiate opportunistic procedures, an active buyer must approach the seller. A fundraising round is a common trigger for venture-backed firms engaged in a planned procedure. If a company on your list thinks they can purchase you at today’s value rather than at a greater valuation once you’ve raised another round, you may be more attractive to them.

During this time, things become a little crazy.

The path to a Letter of Intent (LOI)

You, your board, and your advisors have just a few weeks left to negotiate with all parties involved, regardless of how the process began. If you’re a startup entrepreneur, you’ll either have to reach out to possible buyers yourself or urge your board members to do it for you.