How can leaders build a company that’s ready to be acquired?

An exit strategy is crucial for companies, especially in the current economic climate. In 2023, mergers and acquisitions (M&A) activity has declined due to rising interest rates and uncertainty surrounding geopolitical events. For 2024, Morgan Stanley Research predicts a 50% increase in deal volume compared to last year. Why the change? Morgan Stanley cited rising business confidence and positive global economic news.

Signs are that M&A activity is on the rise. In the first half of 2024, total global M&A transactions are valued at $425 billion. And the volume of M&A activity increased 130% year-over-year in the first quarter of 2024. While the decision to pursue an acquisition or growth strategy depends on a company’s unique goals, priorities, and circumstances, getting acquired is an attractive prospect for several reasons. Among them:

• Faster return on investment
• Free from the uncertainty and risks of trying to grow the business on your own
• Accelerated growth beyond what was possible as an independent entity
• Greater market traction with access to a broader customer base, distribution channels and market presence

Getting to this level requires the right approach. By focusing on profitability, gaining market share and brand awareness, developing the right strategic partnerships, and creating maximum value for your customers in terms of brand and customer loyalty, you can position your company very attractively for a potential acquisition.

Before taking this step, it’s important to understand the nuances of language. The message that supports the acquisition is very different from the one used for sales or media relations. The acquisition message should focus on market opportunity, intellectual property, differentiators, the company’s vision, your leadership team, and your validated market share.

To start

There are many different forms of performance metrics to highlight the success and stability of your business, including market share, profitability, strategic technology partner integrations, customer satisfaction, brand loyalty, and share of voice.

Market share metrics can come from leading industry analysts. Analyst relationships are an important aspect of an integrated marketing plan. Analysts provide third-party quantitative and qualitative validation; their metrics can help demonstrate your traction and differentiators. You should consistently integrate them into your messaging.

Share of voice is similar to market share. It measures the visibility of earned media coverage in the competitive landscape and is important for demonstrating that your company is leading and shaping the conversation within the industry. Additionally, surveys can help you measure customer satisfaction and brand loyalty.

Joint marketing programs with strategic partners not only help build visibility, but can also be a vehicle for a successful M&A. If you can show how your offering fills a gap in their portfolio and helps them compete and close some deals, you’re effectively putting your company on their acquisition radar.

Perfect your message, then work with experts. Start by crafting a clear message and communicate it consistently across all marketing channels, including your website, media engagements, press releases, analyst relations, thought leadership, and social media communications.

You can then begin to onboard your experts. Cultivating champions from industry experts through a dedicated industry analyst relations program can positively influence market perception and help set the stage for a successful exit.

As mentioned earlier, analysts and other third-party influencers are poster children who can validate your market share, highlight your technology differentiators, and demonstrate how your product or service benefits customers with credibility that goes far beyond simply saying so yourself. This includes third-party credibility through positive positioning in the right market research reports and the direct conversations they have daily with their customers about which vendors to consider.

Your company’s spokespeople play an important role in spreading the message to the market through paid, earned and owned media. This includes communicating your vision, your differentiators, your go-to-market strategy, your strategic partnership direction and what sets you apart from others in the industry.

Transparency is key from the beginning. Don’t underestimate the due diligence process. Be careful to avoid common pitfalls. Warning signs that warrant direct communication may include the company’s finances, overall performance, customer and partner relationships, employee retention, and legal issues.

Related: How to Communicate Effectively and Create a Positive Perception During a Merger or Acquisition (and Why It Matters)

Start preparing now

An exit strategy should be part of your business plan from the beginning. By having an end goal in mind, you can create a roadmap to get there. This helps crystallize your vision for the goal and pinpoint your company’s targets. You define success by providing the end goal that your team can work toward with a timeline and key milestones.

Keep trends in mind. Identifying and analyzing the major trends that are driving change and shaping the industry is essential for any business that wants to stay ahead in an ever-changing market. These trends can include economic factors (such as inflation, interest rates, and GDP growth), regulatory factors, or environmental factors.

With a strong understanding of industry topics that drive customer adoption and venture capital or private equity funding, you can make informed decisions about how to focus your business strategy, product/service development, sales and marketing efforts.

An example of a recent trend is the surge in cybersecurity M&A and financings, driven by the shift to remote work. Cybersecurity is a cornerstone of business continuity and resilience in today’s digitally connected world. The cybersecurity landscape is experiencing significant growth in M&A.

Fifteen cybersecurity-related M&A deals, some of them large, were announced in the first half of May 2024. Through M&A, these companies are consolidating to improve their security portfolio and offer more end-to-end solutions. This strengthens their market presence, helps them compete, and attracts a broader customer base.

Related: From Growth to Profitable Exit – Practical Strategies for Selling Your Business

Show the way to the exit

Leadership plays a critical role in preparing a company for acquisition. Leaders, especially those in the technology sector, must begin implementing strategies and tactics that make their organization attractive to potential M&A opportunities. Focus on value creation and stay current with industry trends; this includes evaluating the valuations of other companies in your industry. And remember, effective marketing communications are the cornerstone of M&A success. Work with internal and external experts to ensure your unique value proposition is clear and widely known.