Do you dream of the day your startup gets acquired by a giant tech company like Google? For approximately 200 business owners, that dream became a reality. Google’s parent company, Alphabet, has acquired around 200 companies and, according to Investopedia, is now considered one of the world’s largest tech conglomerates.
What did all of those companies do to be acquired by a tech giant? There is no single answer to that question. There are many reasons for acquisition and there is no straightforward formula.
However, if you want to get acquired by a tech giant, these 5 tips will help improve your chances.
1. Have an incredibly irresistible product or service
When a company believes in your product or service, your business will be more attractive to big tech companies looking for acquisitions.
One of the main reasons a company pursues an acquisition is because the product will greatly increase the value of the company. For example, Salesforce acquired Slack because of the immense value Slack adds to the Salesforce product line.
Is your product truly unique? Do you provide outstanding service in a highly specialized niche? Does your product solve a unique problem in your industry? If so, your chances of being acquired are greater than if you just sell a different version of existing products on the market.
2. Have an established focus on cybersecurity from top to bottom
Cybersecurity is one of the top concerns during M&A deals and for good reason. With data from two companies being passed around, hackers are just waiting for someone to make a mistake. Unfortunately, those mistakes are made often.
A large majority of business decision-makers have reported that cybersecurity issues have jeopardized their M&A deals. While some cybersecurity issues are internal, others occur during the transaction. That’s why it’s critical to use a secure, virtual data room to manage all M&A documents and contracts.
How strong is your cybersecurity posture?
Cybersecurity is not only a potential issue during the M&A transaction, but companies are wary of acquiring another company with a weak or poor cybersecurity posture. While strong security won’t automatically make your company an attractive acquisition, it will make a deal come easier if you are presented with the opportunity to be acquired.
The greater your focus on cybersecurity is since day one, the more appealing your company will be to someone looking to acquire your company.
3. You’ve built unique technology that will complement existing technology
Companies would rather buy innovative technology than build it from scratch. It’s more effective, efficient, and cheaper. If you’ve built innovative technology that would be the perfect complement to another technology, your chances of being acquired are great. For example, Mastercard is working out a deal to acquire Ekata, an identity verification company.
Although innovation is highly desirable, your technology needs to be more than just a piece of software. For example, tech companies routinely hire software developers to create custom software applications that mimic existing innovative solutions.
There’s no benefit to acquiring a company just to gain access to a piece of software. However, when there’s something special about that software – and when there is a large, satisfied user base – that’s when a company becomes acquisition material.
4. You have a large market in the industry
The ability to market to a larger customer base in an existing market is one of the top reasons tech companies acquire smaller businesses and startups. If you have a large customer base in a given tech niche, there’s a high possibility a large tech company will consider pursuing an acquisition.
Technically, you don’t need a database of existing customers – you only need to have a product that will reach more of a given market.
5. Your company will give a tech company a boost
Sometimes existing tech companies need to catch up in a complementary area of their overall market and seek acquisitions that will help them accomplish this goal.
For example, in 2012, Dell acquired Quest Software to get a leg up in the software space. Dell had been largely successful as a computer hardware company, but didn’t have any ties to the software market until acquiring Quest Software.
Prepare, but don’t bet the house on getting acquired
It’s always good to prepare as if your company will be acquired by a large tech company, but don’t bet the house on that outcome. Although acquired companies share certain traits, there is no predictable formula to guarantee you will be acquired.