How to Find the Right Merger and Acquisition Partner

The right merger and acquisition partner can help your startup reach new heights. Follow these tips to find and build a successful partnership.

Published on Oct. 26, 2023
How to Find the Right Merger and Acquisition Partner
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The startup world is notoriously cutthroat. About 90 percent of startups fail, and just 1 percent raise venture capital funding. When the odds are stacked against you, it’s natural to see every similar business in your space as competition. But as the wheat is winnowed from the chaff and the major players emerge, so does the potential to strike a partnership. This is because business competition, especially as a sector begins to consolidate, is largely about finding ways to fill each other’s gaps. 

When devising new solutions, some startups ask, “What can we offer that our competitors don’t?” and “How can we do what they do, but better?” They then build the infrastructure and support for that. Other companies focus less on their competition and more on serving a specific niche, then evolve to fit.

5 Factors to Consider to Find the Right Merger and Acquisition Partner

  1. Audience
  2. Geographic expansion
  3. Diversity of capabilities
  4. Timing
  5. Vision and values

The latter was the case with our companies. Founded in Huntsville, Ala., CommentSold established its stake in fashion retail and catered primarily to small business owners in flyover states. Meanwhile, Los Angeles-based Popshoplive served collectibles vendors and individual creators who were largely based on the U.S. coasts. 

CommentSold brought the back end technology platform and dropshipping capabilities, while Popshoplive brought the user friendly interface and community-forward marketplace. We realized we’d have a far greater impact on a fast-growing market if we joined forces instead of competing. 

Combined with our diverse software offerings, we forged such a strong partnership because we served separate but complementary audiences, touched different sectors, and, when combined, offered solutions for businesses of all sizes. 

Based on these learnings, we advise fellow entrepreneurs to consider the following when gauging which of their competitors could potentially become a merger or acquisition: 

 

5 Tips for Finding a Merger and Acquisition Partner

Not every competitor will make for a great merger and acquisition partner. It’s important to keep  these five factors in mind:

  1. Audience
  2. Geographic expansion
  3. Timing
  4. Diversity of capabilities
  5. Vision and values.

Here’s how to evaluate potential partners around those factors.

 

Audience

As we’ve seen there is power in bringing on a partner who reaches different demographics and interest groups. However, you don’t want to go so far that it compromises your brand. Examine a potential partner’s areas of influence and where their audience’s priorities intersect with your own. Find those shared spaces and desires to avoid bringing a product to an audience that won’t resonate with it. 

The specific relationship a company has with its audience is also key to consider. For CommentSold and Popshoplive, we both draw our conviction from our sellers. We want to see them grow into successful businesses, and we are doing everything we can to empower them with the tools they need.

 

Geographic Expansion

There is a significant opportunity for growth if a merger or acquisition can take your business into a new geographic location. It’s crucial to understand your potential partner’s footprint in that market. 

For example, you may be eyeing an acquisition that serves Europe or China, but how are they received there? Does their level of service vary across regions, and do those variances pose a liability? An advantage? Once you’ve assessed these factors, demonstrate how your own offerings can add value to these new regions and make a plan for entry. 

 

Diversity of Capabilities

When assessing merger or acquisition potential, entrepreneurs should determine how a diversity of capabilities can extend the customer pipeline. Identifying your weak spots and missing pieces will help narrow your criteria for an appropriate partner. 

In our case, CommentSold wanted to partner with Popshoplive for its technology. CommentSold was a full stack platform focused on small to mid-sized businesses. Popshoplive is geared toward creators and small businesses that don't have the resources to do their own fulfillment. As they grow, Popshoplive users can graduate to CommentSold’s platform and offerings. They’ll never outgrow the platform, and we get to keep users for life. 

 

Timing

Timing is also crucial. You could find a partner who fits all your missing pieces, but they may not be ready to make that leap. Always be ready to build new connections and explore other options, but when the chemistry is right and lightning strikes, remember you may have to wait for the thunder – that is to say, even though it may not be the right time to merge or acquire in the moment, keeping those key relationships strong will make it easier to make a strategic move down the line. 

 

Vision and Values

A true partner is one who is moving in the same direction as you, though they may be at a different stage of their journey. In our case, we were trying to become each other, but we realized it would be more fruitful to come together and complete each other’s product life cycles. Other companies may align on a shared impact they want to have, or a larger moral or cultural mission. This shared understanding will act as the glue between your organizations and set you on a path for success.

More on Entrepreneurship5 Milestones From Your Startup’s Path From Big Idea to Valuable Company

 

Assessing a Merger or Acquisition for Growth Potential

According to an article from Harvard Business Review, between 70-to-90 percent of mergers fail, largely due to problems with integration. Assessing growth potential can help prevent issues in integration by ensuring the parties involved are aligned on a shared trajectory. It’s one thing to know where you want to grow, but another to know when you’re ready. 

One way to gauge this is to determine how a potential partner is connecting existing hotbeds of growth in your industry. For us, that connection was TikTok, with which CommentSold has a strategic partnership. While other companies like Meta are pulling back on live selling, TikTok is ramping up support. Having that connection was critical to our strategy moving forward. 

You should also consider how a potential partner is addressing key obstacles in your space. Do they have a unique solution that customers are raving about online? Did they overcome a larger industrial downturn or shakeup where other competitors did not? Adaptability and resilience are critical for growth, especially as two companies merge processes and integrate into one. 

It’s also worth assessing how long a potential partner has been in the market to determine how well they know the space. Even if they’re at a different phase of their journey, if they share your knowledge of trends – and perhaps more importantly, can offer new and insightful perspectives to drive innovation – you’ll be better equipped to address customer needs and rise above the competition.

For this, you have to look far beyond just the company’s founding date. Conduct a deep dive into their capabilities, paying close attention to third-party materials such as reviews and analyst reports. Research the executives’ thought leadership platforms, from LinkedIn pages to personal blogs to TED talks, to see what they care about. Find out where the company is recruiting its best talent. Once you’ve thoroughly vetted a potential partner, take the leap to set that first meeting and see if your visions are truly aligned.

More on Entrepeneurship5 Tips for New Entrepreneurs That Don’t Just Tell You to Fail First

 

Build a Positive Relationship During the Closing Process

Closing on a merger or acquisition is a thoughtful process that takes ample time, patience and understanding. Beyond all the legal and financial processes, there are a number of other variables to consider, such as communicating with employees about the merger or acquisition, establishing new team structures and planning the announcement. 

To this end, closing is far more than just a banking process: it’s an opportunity to set a positive foundation for your relationship with your new business partner. 

Throughout the process, keep your companies’ shared visions and values at the forefront of every action. Reinforce the impact that the merger or acquisition will have on your industry and audience, as well the impact it will have on you and your partner(s) as leaders. You will have to unite your combining workforces under this shared mission, and the best way to do so is to lead by example. 

When finding a merger and acquisition partner, what ultimately matters is that you find someone who is willing and eager to work side-by-side with you, every step of the way. The process is fraught with risk, but that risk begets incredible opportunity for innovation. People want sophisticated solutions and engaging experiences from today’s technology, and those outcomes require unparalleled teamwork and collaboration.

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