Startup acquisitions and building a qualified pipeline are interconnected! To know how one can win acquisitions, it is important to understand how a qualified pipeline may impact acquisitions. A qualified pipeline, also known as an M&A pipeline, is nothing but a bucket of verified and ‘ready-to-acquire targets’ for M&A transactions. Building a qualified pipeline starts with deal sourcing, followed by negotiation, due intelligence, deal closure, and finally integration. To win an acquisition, all these steps need to be organized.
As a dealmaker, one should be aware of exactly what to do to advance to the next stage. Instead of being a list of processes to be used when completing an M&A deal, an acquisition pipeline is a cooperative and easy process. This pipeline will guarantee that the finalized agreement realizes its full potential and succeeds to the fullest extent possible. It could be said that acquiring startups could only be completed through a qualified pipeline!
Why is it important to have a qualified pipeline?
The importance of building a qualified pipeline to achieve a successful acquisition is undeniable! Long story short, a qualified pipeline consists of many steps, and the successful completion of each step is important for a successful integration! It is the successful completion of each step involved in the qualified pipeline that ensures that the final agreement has potential and that both parties involved in the acquisition process will experience growth and prosperity!
4 simple steps to creating a qualified pipeline!
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Locating your ideal acquisition target
It is the first and one of the most important steps to making a qualified pipeline! Completing the merger or startup acquisition deal and then successfully integrating it into the buyer's business takes a lot of time and work. Building a pipeline of possible target candidates, however, is the crucial first step in the acquisition process for a serial acquirer.
You can locate your ideal acquisition target with the help of a trustworthy startup database! One should identify its existing business position and its future orientation as part of the strategic planning process. Second, a gap analysis will be created to identify the needs necessary to take advantage of new business opportunities to fulfil these new business objectives. A qualified M&A pipeline works like an M&A strategy that seeks to align the strategic vision with the business objectives!
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The titles you ought to pursue
Once you have successfully outlined the types of businesses that are suitable for you and that you want to target, your next step should be deciding specifically who you should reach out to! It is important for acquiring a startup. The high-performing companies prioritize specifically two kinds of personas, economic buyers and champions. While a champion is someone who has a stake in your product's success, an economic buyer is a person who has the final say in the business decision.
High-performing businesses distinguish themselves from low-performing ones by focusing on three key personalities. When it comes to creating connections with important decision-makers, high-performing businesses adopt a more focused strategy. They go for the high-value stakeholders, champions, and buyers in the economy.
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Setting your pipeline's priorities
You must have a list of businesses that fit your ideal customer profile! You need to set your priorities at this stage. It is one of the most important stages where you need to compare a business with your ideal customer profile. A trustworthy startup database can point you in the right direction here!
For instance, if you have identified 10 traits as being present across all of your concluded sales, you should give priority to leads that also fulfill these 10 traits.
Your top ten qualities will logically consist of those that are the most desirable.
Following this, it is merely a matter of eliminating options. The companies that fit 9 are listed first, followed by 8, and so on. By prioritizing the most qualified prospects first, you are improving your deal-sourcing funnel.
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Establishing M&A connections.
The possibility of effectively closing agreements is decreased if your CorpDev team is not strongly engaged with the key stakeholders, who, in the end, make the ultimate choice. Thus, it could be said that establishing M&A connections is important to a successful integration or startup acquisition.
To win M&A with a qualified pipeline, you need to take the following steps:
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Define your target market:
To achieve a successful integration, some essential steps need to be followed, and defining your target market is one of them! Identify the types of companies or customers you want to acquire. This will help to direct your efforts in the right direction and target the right prospects.
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Build a strong pipeline.
Building a strong pipeline is the next step that must be taken. Create a robust and well-qualified list of potential acquisition targets by using a combination of research, networking, and outreach efforts. It is essential to build a qualified pipeline.
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Qualify your Deals:
Use various criteria, such as company size, revenue, growth rate, and industry, to assess the potential of each lead and prioritize your outreach efforts.
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Establish a relationship:
Build relationships with the decision-makers at each company that you have targeted. This can be done through regular communication, face-to-face meetings, or by providing valuable resources and insights.
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Engage in buyer-seller bargaining:
Clearly articulate the benefits of a potential acquisition, such as increased market share, expanded product offerings, or cost savings.
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Close the deal:
This is the final and most important step in the startup acquisition process. Close the deal by negotiating the terms of the acquisition, securing financing, and executing the necessary legal and regulatory steps.
Why data-driven deal sourcing should be adopted for a qualified M&A pipeline
Acquiring success at acquisition is like pulling the desired needle out of an M&A haystack. While IBs' traditional networking techniques do help with deal sourcing, they are primarily effective for big-ticket purchases, missing out on smaller but more valuable opportunities. And data is involved here. All businesses—bootstrappers, late-stage startups, tiny, small, medium-sized, and anything else under the sun—can be tracked down and examined using data as leverage. Data also has its restrictions, though.
Even though a trustworthy startup database can help businesses find deals rapidly, market uncertainties and shifting customer preferences might have a different story to tell. As a result, CorpDev leaders employ data and analytics to analyze this situation and take a data-driven approach to acquisitions to better understand the market, consumer needs, competitive landscape, and other factors.
To conclude, it could be said that winning an acquisition highly depends on a qualified pipeline. The experienced professionals at GrowthPal can help you in your acquisition journey! Growthpal assists startups and investors by delivering customized M&A pipelines with a list of qualified "ready to acquire targets," empowering informed decision-making! Connect with us to learn more details about our purpose and goals. Help your business grow with Growthpal’s expertise and guidance.
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