A summary of the acquisition process with tips, templates, and resources to help you get Acquire'd
In this article, you'll learn how to:
- Evaluate buyers
- Field acquisition offers
- Pass due diligence
- Close safely with escrow
- You've been Acquire'd!
Would you like free and expert advice on the acquisition process and how to create the perfect listing? Let us know by emailing email@example.com.
1. Evaluate buyers
Speak with interested buyers to find the right fit
Once your listing is live, interested buyers will request access to your startup’s private information to decide whether your business is worth acquiring.
Before acquisition talks get serious, get to know interested buyers and their goals.
- Look for the Verified identity badge on their profile, meaning they’ve successfully passed our ID checks, so you can feel safe that they are who they say they are.
- Check LinkedIn to ensure their background and experience backs up any claims they’ve made in their opening message (or will make later).
- Verify they have the skills and experience to earn a return on their investment. If you leave your business in good hands, everybody wins.
- Look for the Verified funds badge that indicates they have the capital to acquire your startup. You don't want to waste time with a buyer who can't close the acquisition.
Share your data when the buyer signs an NDA
Buyers might ask to view code, contracts, and other sensitive data to help them decide whether to pursue an acquisition with you (called initial due diligence).
We recommend asking buyers to sign a mutual NDA automatically with their requests for access so you can share data with confidence, available from your listing settings. You and the buyer can sign the mutual NDA as an individual or company based on how you intend to close the deal.
Now is also a good time to set up your data room:
- A data room is a virtual folder for sharing acquisition data.
- Create and populate your data room now to save time later.
- Your data room lets you control access to sensitive details.
Lock in buyer interest with an acquisition timeline
Set deadlines for each stage of your acquisition up to and including a letter of intent (LOI). Without deadlines, you risk the acquisition stalling, but they must work for both of you.
For example, set deadlines for:
- Initial calls and light diligence
- Negotiations, final questions, and initial offers
- Receipt of the final, formal LOI
Communicate often and consistently to ensure your acquisition maintains momentum.
Evaluating buyers with Acquire.com founder, Andrew Gazdecki
Letter of intent (LOI)
A formal, written document indicating the terms a buyer is offering a seller in a proposed acquisition. Although not a contract, it is a document stating a serious intent, and may be legally binding in some circumstances. Consider the LOI as a starting point for negotiations.
A virtual, shareable folder where you store all the documents and data relating to your acquisition. As well as being a convenient way to share information, your data room allows you to retain control of sensitive data while moving forward with the acquisition.
Non-disclosure agreement (NDA)
Sometimes called a confidentiality clause, an NDA is a legal agreement between you and the buyer that prevents the buyer from sharing or disclosing information about your company to third parties or for other uses outside of an acquisition.
2. Field offers
Review the purchase price, terms, and conditions in an letter of intent
Your acquisition offers will come in the form of a letter of intent (LOI).
Although not usually legally binding, an LOI can include legally binding terms, especially in lieu of a signed asset purchase agreement (APA). Hire counsel to help review the terms.
An LOI is typically valid for a week or more and includes:
- Assets to be acquired
- Deal structure and payment terms
- Escrow and closing conditions
Unsure how to review and negotiate a letter of intent? Speak to one of our customer success managers to help you get the deal you deserve.
Negotiate until you’re satisfied with the price, terms, and deal structure
Once you receive the LOI, review the terms before the offer expires and then negotiate anything you’re unhappy with. Every point of an LOI is negotiable.
For example, you might:
- Suggest a shorter exclusivity period.
- Negotiate a better price or deal structure.
- Minimize your exposure to reps and warranties.
Accept or reject the final LOI
You must accept or reject every LOI you receive. Ignoring them sends the wrong message and impacts your reputation on the marketplace.
Once you accept an LOI, you:
- You enter the exclusivity period.
- You can’t talk to or negotiate with other buyers while your LOI is valid. All other buyers' access to your startup will also be revoked.
- Your acquisition moves into the closing stages.
Managing offers with Acquire.com founder, Andrew Gazdecki
- What Is a Letter of Intent?
- How to Evaluate a Letter of Intent
- How the Components of an Offer Affect Your Acquisition
Representations and warranties
A list of representations about your startup that have encouraged the buyer to acquire it, which although correct at the time, might turn out to be false later, and how you’ll indemnify the buyer if that happens. It’s a bit like an insurance against misrepresentation and fraud.
Exclusivity (no-shop clause)
Your LOI will include an exclusivity or no-shop clause which prevents you from discussing or negotiating with other buyers while the LOI is valid. The exclusivity period starts the moment you accept the LOI and continues until the offer expires.
If there’s a chance you or your employees might compete against the buyer post-acquisition, the buyer will include a non-competition clause in the LOI to prevent it. This clause prevents you from operating a similar business in the same industry for 12 months or more.
3. Pass due diligence
Populate your data room with the help of senior teams and advisors.
Due diligence is where a buyer verifies your business is all that it seems.
Expect your buyer to ask questions about every department and business function to minimize acquisition risk.
To ensure due diligence goes smoothly, collect and compile evidence for your answers with help from your senior team and advisors.
Then add everything to your data room for sharing later, including:
- Financial statements and tax info
- Asset, customer, and vendor lists
- Legal documents and contracts
Due diligence can be the most challenging stage of your acquisition. If you're feeling overwhelmed, ask our in-house M&A team and expert advisors for help navigating this complex and often demanding process.
Selectively give buyer decision-makers access to due diligence data
Your data room should allow you to share items securely.
Work with the buyer’s decision-makers so only those necessary see your data. You’ll also conclude due diligence much faster with fewer handoffs.
Use your judgment when sharing data:
- Only answer relevant and reasonable questions.
- Ensure you’ve vetted the buyer, established trust, and they’ve signed an NDA.
- Help the buyer mitigate risk, but remember you can’t eliminate every risk.
Sign an asset purchase agreement and then begin closing on Escrow.com
Once you complete due diligence, you’ll sign an asset purchase agreement (APA) with the buyer to finalize the assets, terms, and closing conditions of the acquisition. Sign as an individual or company to ensure the correct legal information is included in your APA.
Before signing the APA:
- Check you’re happy with the price and terms.
- Ensure the wording is fair and enforceable.
- Review the APA with legal counsel.
Once you sign an APA, you commit to the acquisition. You can usually only cancel an APA issued on the Acquire.com platform if you and the buyer agree to do so.
How to pass due diligence with Acquire.com founder, Andrew Gazdecki
- Due Diligence and How to Survive It
- 5 Things to Remember When Preparing for Legal Due Diligence
- What to Expect From the 6 Legal Stages of an Acquisition
- Sync Your Financials With the Acquire.com P&L Builder
A process where a buyer inspects a potential investment. Often includes a detailed review of accounting history and practices, operating practices, customer and supplier references, management references, and market reviews.
Profit and loss (P&L) statement
A P&L statement shows your revenue (income) minus expenses (outgoings) for a given period of time. It produces a figure for net profit and how you get to that figure. Buyers will want to see at least one year’s P&L and possibly more to establish if your startup is growing and profitable.
Digital minute book
A digital copy of your startup’s legal documentation available from your counsel. When building your data room, ensure you include a copy of your digital minute book for passing due diligence. Otherwise, you’ll need to track down and group your legal documentation manually.
4. Escrow & transfer
Enter escrow with your buyer on Escrow.com
Once you and the buyer have both signed an APA, your buyer will send you escrow details to agree to on platform.
Check the details, especially if you agreed to conditional payments and other post-closing terms, and when you’re happy, agree to them.
Escrow.com will execute your transaction safely and securely, including conditional payments, and you’ll get regular status updates on your Acquire.com dashboard.
You might feel a little nervous about sending valuable assets to a third party. Ask our experts to walk you through escrow and how it protects you from fraud.
Transfer assets described in the APA
Escrow.com safely manages the transfer of funds and assets to protect you and the buyer from fraud.
Only transfer your assets once Escrow.com verifies the buyer’s funds. Transfer each asset one at a time.
The buyer will inspect the assets within the agreed inspection period and then approve them. Once approved, Escrow.com will release the buyer’s funds to you.
To ensure a smooth transition, create an asset transfer plan that:
- Inventories all the assets to transfer
- Describes the assets destination
- Explains how to transfer the assets
Confirm you've received funds from Escrow.com
Your acquisition will usually include a closing payment paid immediately after the buyer approves your assets.
If you agreed to conditional payments, you’ll receive these when you meet the applicable conditions and the buyer again approves them.
Seller financing is the only deal component you can't transact on Escrow.com. If you've agreed seller financing with the buyer, please follow the terms as described in your APA. Ask your customer success manager if you need help.
How escrow works with Acquire.com founder, Andrew Gazdecki
- Close Safely and Easily With Our Escrow Builder
- How to Safely Transfer Your Assets in an Acquisition
Escrow is a third-party service that safely manages the transfer of funds, removing the need for trust between two parties doing business together. As a regulated, neutral party in the transaction, an escrow service provider prevents fraud and other financial crime.
Asset purchase agreement (APA)
An APA is a legal agreement between you and the buyer that describes the terms, conditions, and assets of an acquisition. Once you and the buyer sign the APA, the acquisition is legally binding on both of you, and then you’ll move to escrow to close the transaction.
Intellectual property (IP)
IP is an intangible asset and might include your startup’s code, proprietary technology, trademarks, copyrighted assets, patents, and so on. You should have legal agreements that protect your IP from anyone else using, reproducing, or distributing it without your consent.
5. You've been Acquire'd!
Once escrow closes, your acquisition is complete
Congratulations! You have sold your business and are ready for your next adventure.
What you do next is up to you, but we'd love to know more about your journey as a founder. Check out our How I Got Acquire'd blog series or our SaaS Acquisition Stories podcast to learn how we promote you and your acquisition journey to 100,000s of fellow founders.
If you're interested in participating, drop our head of marketing, Roger Tung, a line on firstname.lastname@example.org.
You're now an acquisition expert! Why not put those new skills to a life-changing exit on Acquire.com? Start your listing now and your customer success manager will make it the best it can be. Best of luck!