From NDA to LOI: what really happens when your startup gets bought?

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What does acquisition mean? process looks like?

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There are two types of acquisition processes: planned and opportunistic. The planning process is when a company looks for a suitable buyer for its business, while the opportunistic process is initiated by the buyer.

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In either case, the process begins with building a credible list of potential buyers, as described in Part 1 of this article series. Then it’s a sprint with potential buyers that (hopefully) leads to letters of intent.

From there, it’s time for due diligence, which can last several weeks. With some luck and a lot of effort, the deal will be closed and you will be able to proceed with post-acquisition integration.

Shopping sprint

Even if the sale price doesn’t break records, this is an opportunity to create a successful outcome that maximizes your long-term impact.

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In the opportunistic process, the buyer approaches the company he wants to buy.

If you are approached and decide to make an acquisition, you have a short window of time to continue this conversation and reach out to other companies on your list of potential buyers.

In your initial conversations with an active buyer, you can find out how much they intend to offer, as well as set the stage for the process.

In a planned process, you are in control of time, but you need to think about a triggering event in your business that creates some time-related pressure.

In opportunistic processes, the triggering event approaches the active buyer. For venture capital firms in a planned process, the triggering event is often a funding round. You may be interested in companies on your list if they decide they can buy you at today’s price and not at a higher price after you’ve raised another round.

That’s when things get hectic.

Path to LOI

Regardless of how the process started, you, your board of directors and consultants have a few short weeks to negotiate with all stakeholders. As a founder, you can either approach potential buyers yourself or ask board members to do so on your behalf.

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