Mergers And Acquisitions | Prepare your Startup For M&A Process

 

PitchBook reports that the IPO reached a 50-year low in Q2 2022 and that VC investments were down 30% from Q2 2021. The majority of venture-backed companies faltered during the past recession, and many of them ended up pursuing M&A tactics. However, some well-known companies, like Uber, Airbnb, and Square, managed to survive the crisis.

When deal-making slows down, venture capital frequently go to the perceived market leader, starving other venture-backed companies operating in the same industry of capital. While some adjust and survive, others end up withdrawing and providing future Mergers And Acquisitions opportunities for those still standing.

However, VC Funding-backed M&A rebounded and took off during the early recovery: Annual deal prices exceeded $30 billion in 2010, remained stable, and then soared above $70 billion in 2014.

It's important to keep in mind that M&A processes take 12 to 18 months to complete, regardless of whether you intend to look for a buyer or implement a strategic purchase in response to shifting market dynamics.

The sudden decline in VC investment today signals a post-recession-style MSME IPO tsunami is approaching. Startup CEOs can begin positioning themselves now for that wave of acquisitions.

Knowing how a potential buyer will assess you is crucial for getting a head start on the process. Most will have a rated scorecard with certain criteria, like deal terms, strategic fit, competitive gaps addressed, cultural compatibility, possible upside, and lastly lift, how challenging the acquisition and Fund Raising subsequent integration will be.