3 things startup founders need to know about mergers and acquisitions – TechCrunch

When the founders of startups think of mergers and acquisitions (M&A), we tend to think of Mad Men processes, involving a dramatic office reshuffle and costly rebranding. The reality, however, is that mergers and acquisitions aren’t just limited to flashy companies, and they shouldn’t be bulldozed through corporate culture.

In fact, since the start of 2021, out of 530 acquisitions of startups, more than half were startups that bought other startups. More start-ups are getting on the M&A train to take advantage of the technology and talent of other startups and to absorb competitors. They also realized that deals don’t need to have hefty price tags and paperwork for big companies.

I have known this firsthand from 15 years of buying and selling businesses. I previously worked at JP Morgan facilitating mergers and acquisitions for investment banks, and applied what I learned to the startup space, where I now use it to grow my businesses. I conducted 12 acquisitions on my Kiwoko retail platform, which helped it reach over 150 million euros in revenue, and was ultimately sold five times.

Mergers and acquisitions are particularly beneficial for startups that are struggling to scale operationally, as they are essentially buying cash flow, revenue, and traffic from other companies, which means startups are grabbing hold of the money. ‘a larger share of their markets. They are also a good way for startups to find, consolidate and experiment with their value proposition. The problem, however, is that most founders don’t know how to get started with mergers and acquisitions and resign themselves to the shadow of the bigger players. But mergers are accessible and beneficial to businesses of all sizes.

Here are my three insider tips for startup mergers and acquisitions:

Let your internal team get the ball rolling

Mergers and acquisitions naturally come with friction and costs, but unlike businesses, startups don’t need to outsource people to ease the steps. You don’t need investment banks, advisers, legal teams, and consultancy firms to make sure everything runs smoothly.

Founders can perform business and financial audits with the support of internal resources such as the accounting department and lawyers, as well as leverage their network and perform due diligence through trusting relationships. Granted, you need to spend a lot of time and concentration in this verification step, but it is possible and effective without bringing in new players.

Beyond logistics, founders must actively analyze the value of the target business. For example, each of the acquisitions I made – even with considerably smaller companies – had better purchasing terms with at least one supplier.