Finding your Acquirer

Who may want your company?

We have studied how M&A theses add value to your company and can make it become an object of desire. We also understood the relationship between the theses in the sense of which has more potential for attributing value than others.

Now let's take a step forward and identify the companies that may be interested in yours based on each thesis.

Theses > Markets > Companies

Some thesis cards direct you to look for companies in specific markets. For example, let's start with the direct committer's thesis: Increased Market Power. Here we are talking about an acquisition or merger with a direct competitor. Who are they? Do you have any assets that are bigger and more capitalized than you? If so, there is potential for an acquisition. If not, there may be potential for one or more mergers. The case of the emergence of Movile is an excellent example of what is possible through the merger of direct competitors.

When we talk about vertical expansion, we are referring to your value chain. Unions between suppliers and customers are typically discussed here. But it may be that your customers and suppliers are not part of a very specific value chain. If your company doesn't serve a very particular industry (e.g. automotive, hospital, retail, etc.) that's okay. It's worth looking at them with the same curiosity as whether there might be an interest in a union of forces, even if we later discard this thesis card.

The horizontal expansion card needs a little more careful analysis. What are the segments adjacent to yours? The horizontal refers to the side, like the acquisitions of ERP systems specialized in retail, distribution and supermarkets that I made at TOTVS. But eventually the expansion into a new segment can be for a larger size of customers. If you are a company that serves medium-sized businesses, a merger with a similar company that serves small businesses could be a good fit. Or that player for whom you lose customers when they grow and your solution no longer serves them so well. It might also be a good fit.

In this sense, the Market Access card that we use to illustrate the transaction between Intuit and Zeropaper can also be an inspiration to find companies in segments connected to yours. Where do your customers come from and where do they go when you don't serve them well? Here you may have clues that lead to possible interested parties!

Geographic expansion is another important card to look for potential interested parties. Here we are typically talking about similar companies, but which do not operate in the region where you operate. We used this thesis card to illustrate the acquisition of Zeropaper by Intuit. Another notorious example is Walmart's acquisition of India's Flipkart. We're not talking about direct competitors, only because they weren't in the same geographic arena. So look outside: who does more or less what you do, but in other regions or countries that could join forces with your company to expand geographic coverage?

Finally, an Ecosystem Expansion thesis can also reveal companies that yours is connected to as part of that ecosystem. Here we are typically talking about a company whose ecosystem is THE business model. A platform, marketplace, community, even a class/association entity. If you run an organization of this type, this could be an interesting thesis to explore. My first startup, Onyo, was acquired by Alelo. Both companies have platform characteristics. One for orders and one for payments. The thesis of unity for the expansion of these ecosystems beyond their original borders was a motivator for this transaction.

Theses not linked to markets

Things can get more creative when we are talking about cards such as acqui-hire and acquisition of technology/resources. Here the market segment is not so relevant as long as your company's assets (people, knowledge, technologies and other resources) unlock value for the potential interested party.

A company interested in bringing in its team, technology and other resources can be in any segment. However, she will hardly look at this opportunity seriously if there is not already a relationship. So typically these transactions will happen with companies with which yours already has a relationship in some way. It could be a partnership or a commercial relationship, but whatever the model, one already has some experience with the value that the other can bring.

The Platformec Case

The case of Nubank's first acquisition, Plataformatec, was exactly this. We classified it as an Acqui-hire, but it only happened because the company was already a service provider for Nubank. Ptec had three interested companies. A consulting competitor, a former client and Nubank. In the case of the first, as it was not a direct competitor, we classified it as a horizontal expansion thesis. That was the first opportunity that appeared. So the consultancy partners used their relationship with a client and a former client to "dig" two other proposals, in this case, talent acquisition. The combination was used to unlock value through competition. 

Find out more about this incredible story by reading the article dedicated to it.

Several cards for one little house

Once the company has been identified, it is time to look if there are other theses that it also fits into. If there are multiple theses associated with a possible transaction, this may justify a greater perception of value about your company.

When we study the case of Zeropaper, for example, we noticed that in addition to horizontal expansion, Intuit was purchasing a lead provider, which we classified as "Market Access." ZP was not a competitor to Intuit's products, which wanted to bring them to Brazil. It had smaller customers who, when they no longer felt served, looked for a more robust solution. In other words, we could even add a horizontal expansion card, in the case of another customer segment. The combination of these theses made entry into Brazil through the acquisition of Zeropaper more attractive than an organic entry, and also than the acquisition of a company that would have product overlap, such as Conta Azul.

Theses help to identify the company and understand the rationale for a transaction with this organization. They are important so that you can speak their language and eventually implant the idea of ​​this strategic rationale that was not even in the heads of your executives.

It's time to start using a CRM

This mapping is extensive and at the same time it is just the beginning of the work. Without organizing yourself, you will certainly get lost. That's why I recommend adopting a CRM, even if it's just a spreadsheet, for this mapping.

Don't mix this CRM in the same tool where you manage customer relationships. Mergers and acquisitions matters require confidentiality and you should not allow space for messing it up. 

One tool option I like is the Folk. It's a very basic CRM, but with an integration with LinkedIn that takes a lot of the friction out of this mapping. If you have found a company that you may be interested in in the future, add it to Folk without leaving LinkedIn. It's practical, even if it's just for this initial survey.

Here is a link with my referral code.

What comes next

After identifying the companies, we will select the ones that really make sense for us to approach. To do this, we will try to understand what the synergies and disergies are between your company and this other company. But this is a subject for another article.

Conclusion

M&A theses are a great tool for identifying potential companies with which it would make sense to join hands. With this methodology we start with the why (why a company would be interested in acquiring or merging with my company) and then understand which companies fit this why. But the moment this fit is identified, understanding the strategy of this relationship is immediate.

This favors the beginning of a conversation, partnership or relationship that is what will lead to a transaction.
What we want to do here is expand the possibilities. Competition is always the best way to increase the value of your company when you have a proposal. But to create this competition quickly you already need to have established relationships. This takes time and must begin with extensive mapping to avoid being left to the wind.

We want to be intentional about who makes sense to team up with. This is the way.