Most startups and emerging companies miss the opportunity for effective exit planning by not integrating exit planning into their business development activities. The most likely M&A partner is an existing partner, especially if you are making the partner successful.\u00a0 By understanding the relationship between business development and exit planning, you can utilize your partnership efforts to accomplish both objectives.<\/p>\n

Startups are often told that exit planning is a dirty word, because investors (mainly venture capital firms) want the startups focused on building the next $1B company.\u00a0 Unfortunately, only .07% of the companies make it into this \u201cUnicorn Club\u201d (http:\/\/techcrunch.com\/2013\/11\/02\/welcome-to-the-unicorn-club\/).\u00a0 Additionally, only 22.5% of venture back companies go public (although that number does seem high), according to The Venture Capital Cycle, 2nd edition, 2006.\u00a0 The remaining startups are left to contemplate a different future: bankruptcy, M&A exit or stagnation (also known as irrelevancy to your investors looking for a return).\u00a0 Of course, everyone knows that significant amount of investor returns comes from M&A exits, which creates a dichotomy between what your investors tell you and the realities that everyone knows.\u00a0 To deal with this dichotomy, startups should integrate exit planning into the business development activities.<\/p>\n

Without exit planning, startups often lose significant value in their exit.\u00a0 The startups aren\u2019t prepared for the worst-case and best-case scenarios.\u00a0 In the worst-case scenarios, companies wake up one morning to realize that their funding is drying up and they haven\u2019t achieved profitability.\u00a0 There is the inevitable scramble to find an exit.\u00a0 However, the harsh reality sets-in for these companies when they realize that they haven\u2019t built the necessary partner relationships to facilitate an exit.\u00a0 There is a mad scramble to figure out the potential buyers, who is the right person at the partner to execute on an M&A deal, and how to pitch an acquisition to each company.\u00a0 Often, companies face the terrible introductory phone call of having to introduce their company to a potential buyer and pitch a sale of their business in the same call.\u00a0 The success rate of such \u201cfire sales\u201d is low, and if the company can find a buyer, the valuation is usually pennies on the dollar.<\/p>\n

In the best-case scenario, when your company receives its first unsolicited M&A offer, you want to reach out to other potential buyers to solicit competing bids.\u00a0 When companies aren\u2019t prepared, they are forced to pay million(s) to advisors to find other potential buyers.\u00a0 However, if you have done your planning in advance, you should already know who the other potential bidders are, and can save significant fees.\u00a0 Additionally, the window for obtaining other bids is often short, and the other potential buyers are in reactionary mode.\u00a0 The internal process for potential buyers takes time.\u00a0 Many potential buyers can\u2019t respond quick enough to make a serious competing bid.<\/p>\n

To avoid these scenarios, you should integrate exit planning into your business development activities.\u00a0 With any business development efforts, you should start by understanding your ecosystem, including your competitors, inbound partners, alliance partners, go-to-market (GTM) partners, GTM alliances and other partners in your ecosystem.\u00a0 As you build your business, you will start forming partnerships with the key players in your ecosystem.<\/p>\n

Layering exit planning over your business development activities only requires a slightly different analysis of your partners.\u00a0 You should understand (1) your M&A fit to their organization, (2) the rationale for a potential acquisition, (3) the partners M&A history, (4) the \u201cM&A power structure\u201d at the partner, and (5) the key decision makers to know for M&A activities.\u00a0 Once you understand these factors, you will have a roadmap for positioning your company for a potential exit.<\/p>\n<\/span>","protected":false},"excerpt":{"rendered":"

Most startups and emerging companies miss the opportunity for effective exit planning by not integrating exit planning into their business development activities. The most likely M&A partner is an existing partner, especially if you are making the partner successful.\u00a0 By understanding the relationship between business development and exit planning, you can utilize your partnership efforts […]<\/p>\n","protected":false},"author":7,"featured_media":8688,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":""},"categories":[87,100,98],"tags":[],"_links":{"self":[{"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/posts\/8879"}],"collection":[{"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/comments?post=8879"}],"version-history":[{"count":0,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/posts\/8879\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/media\/8688"}],"wp:attachment":[{"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/media?parent=8879"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/categories?post=8879"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/tags?post=8879"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}