You need more run-way than you think to sell your start-up
16 months of run-way is the time where companies need to pull together a dual path strategy around a M&A exit and the path to independence.
Yes, 16 months.
You want to budget more time than you need to run a successful M&A process, because it takes time to build a strong relationship with acquirers, they need to time to diligence and negotiate price and terms, and figure out the integration plan. There are tens of thousands of documents to create, complex votes, and very tough internal and external negotiations. Finding that unique window where acquirers have a burning need for our products are often outside of one’s control. To maximize valuation, it’s always better to be bought vs. sold.
Negotiations are often about figuring out alternatives, and when you have time on your side, you have a strong alternative. You can continue to run the business and fight for independence. When you have time on your side, you also have more time to find another buyer to introduce competition.
16 months gives you enough time to get the board and a very small sub-set of the team onboard, and set the strategy. It gives you time to have dozens of conversations that lead to nowhere, pick yourself up after during the emotional roller coaster when deals fall apart, and to re-set.
So, what do you do if you have less than 16 months of run-way? Or, you find yourself in a different position, with buyers knocking on your door? Shoot me a note, and let’s chat M&A strategy :)