We have all read the headlines and press releases touting an acquisition with a fit so seemingly perfect it feels predestined. It may be true in some cases that two businesses just “found” each other. However, it is more likely that a solid acquisition is the result of a calculated process on both sides of the deal. To put it bluntly: Good acquisitions do not materialize out of thin air.
Do not depend upon your amazing product or service offering, no matter how revolutionary, to reel in the deals alone. Do not believe that your own hype will raise the interest of potential buyers. Do not feel that you will be one of the rare companies that just “finds” its perfect match. If you are pursuing an exit strategy of acquisition, you had better be thinking with an acquisition mindset and planning to make it occur.
Developing a roadmap to acquisition may seem a little daunting, but the process can actually be fairly simple—if not easy. It can be summed up in four critical steps which, when followed, will dramatically increase your chances of success. These are the signs that say you are serious about being acquired.
1) Create a strategy.
It might seem like an obvious first step, but you would be surprised by the number of business leaders who do not follow, or even possess, a clear, articulated strategy. I am convinced that without one, any success a company meets is purely by chance. The power of a great idea or an incredible product can only take you so far. You need a North Star to guide you.
But creating a strong strategy that accurately reflects what your business offers and how it can be leveraged for acquisition is not always easy. The temptation to exaggerate strengths and downplay weaknesses can be strong. Your strategy must address what makes your business attractive while honestly acknowledging where it falls short, and how the business can make up for these perceived shortcomings. When developing a strategy that will take you to acquisition, pie-in-the-sky thinking must be tossed aside in place of stone-cold reality.
Be especially careful not to fall into the trap of blindly trusting your own assumptions without backing them up with evidence. Take advice cautiously and with scrutiny to ensure you are not just listening to sycophants and good-intentioned well-wishers. Create an optimistic strategy, but one with realistic expectations and an honest approach. A plan created through rose-colored glasses will quickly fall apart.
In the cannabis industry, there are some unique, significant challenges that any acquisition strategy will need to address. There will no doubt be numerous competitors in your space, many of whom will also be vying for eventual acquisition. Positioning among a sea of companies all hoping to be acquired can be a tricky proposition. The rapidly changing nature of the cannabis industry requires swift adjustments when they are needed to adapt to sudden change. Be clear that your strategy differentiates your company in the correct ways, and is nimble enough to alter course if necessary. Avoid relying on the personalities of top leadership as a key component of your strategy. And be certain any strategy recognizes and accommodates the financial and regulatory issues the business will face in the cannabis space.
2) Generate buzz.
Very often, companies neglect or ignore one of the most important tools at their disposal on the road to acquisition: Communication. If your acquisition strategy does not include a communication plan, go back and revise the strategy. An investment in a consistent and sustained communication program is what sets smart companies apart from others, and can make the difference between being acquired and being ignored. In a choice between two equals, the business making the most noise is the one that grabs investors’ interest. A focused communication program with a consistent flow of information reaching the right audiences conveys momentum, purpose and energy. These are three attractive factors any business desires.
But generating buzz does not come without risk. Avoid extravagant marketing excesses that detract from the business. That brand-new Tesla wrapped in the company’s logo probably looks pretty cool, but it sends a frivolous message. Frugality is rewarded above indulgence when it comes to becoming acquired. Use your communication approach to thoroughly research the right events and conferences to attend to get in front of the right audiences, as well as the best organizations with which to associate your business. Utilize your messages to showcase how your product or service solves the problems others cannot or will not address.
Finally, although the competition might be cutthroat, your communication does not need to follow that lead. Engage your competition as a community to encourage a good-natured, if combative, network of like-minded professionals. The competitor of today could be the partner of tomorrow. Go ahead and make a splash, but do so with humility.
3) Build the right relationships.
As you have most likely done to help build your career, establishing and maintaining relationships with the right people is also a critical part of any acquisition strategy. Your communication plan should clearly outline which audiences are essential for your strategy to succeed, and you should identify how you will connect with and impress these audiences. There are some telling indicators like who sits on your Board of Directors or makes up your Advisory Board that can increase your credibility, and you should be sure these entities communicate the right message to potential buyers. Recruit board members whose industry knowledge and strategic influence suggest confidence in your company’s product and management. Fill advisory boards with experts and influencers who enhance your reputation and increase the validity of your claims. Secure partnerships that minimize your shortcomings and complement your offerings. Finally, communicate all of these attributes to the right media and analyst audiences on a consistent basis to remain top of mind when your sector makes news.
As a cannabis business, it will be critical to establish relationships with experienced experts who can help navigate the often confusing and constantly changing regulatory and legal environment of the industry. Not everyone expected to land in cannabis, and many are ill-equipped to negotiate the hurdles and roadblocks the space can throw at business. Working with the right attorneys, accountants and other professional service providers who know the industry and understand its nuances can prevent deal-breaking errors down the road. Audited financials that reveal a monster tax liability will kill a deal in an instant.
Utilize your relationships to position for the long-term vision of acquisition, as well as to satisfy near-term needs. Examine potential partnerships with an eye toward the future. Those that make sense today may not be compatible with your exit strategy.
4) Follow up and follow through.
As trite as it might sound, the old business maxim still applies: Plan the work and work the plan. No matter how well researched or meticulously articulated your overall acquisition strategy, there will always be hiccups. Be prepared to stay flexible, recognize flaws in thinking and adapt when necessary. Mistakes will be made and unforeseen industry developments will undoubtedly interfere with your plans, but the ability to respond with agility and quick action will be easier when you are being guided by a sound strategy.
Of course, none of this will guarantee success. However, following these four steps will position you far above other companies competing for the attention of would-be suitors. They are the telltale signs of a business that understands its appeal and is organized and strategic in how it meets its goals. These are the attributes anyone desires in a company considered for acquisition. And they are the ones that grab my attention, as well.