“What’s the best way for a tech company to get acquired?”
“Build a great business.”
That’s what my Partner, Ned Hooper, used to say to startups when he was Chief Strategy Officer and Head of M&A for Cisco. Cisco basically wrote the playbook on how to grow a large technology company through acquisitions, acquiring over 75 companies between the period of 2002 and 2010, a period when Cisco grew revenue by almost 10% annually.
Ned is, of course, right that most of a CEO’s focus should be on building a sustainable business, which I, and many others, have written about. But given that the vast majority of exits in technology are, in fact, acquisitions (over 96% in 2013), and IPOs bring their own set of challenges, this post focuses on what it actually takes to attract acquirers. While technology companies tend to get bought, not sold, acquisitions also don’t “just happen.” So, “showing a little ankle” in the right way will help get you noticed by the right potential acquirers without you ever having to “sell.”
Regardless of whether you are thinking about exits right now, you cannot ignore the market. When the large strategic technology acquirers decide that a market is interesting from an M&A perspective, it can be tough to be the only company left standing when your top competitors have been bought by bigger players.