February 21, 2022

What my corporate experience taught me about startup M&As

Signing the dotted line is just the start

Over half of startup acquisitions last year were startups purchasing fellow startups, as early-stage businesses are increasingly recognising the value of integrating each others’ teams and technologies. It’s a trend that will likely continue this year. 

But unlike corporates, startups often don't have the capital and resources to consider mergers and acquisitions (M&A) as a strategy into the process. 

After 15 years buying and selling companies for corporate banks, I've since transitioned to conducting M&As in the startup space. I’ve seen first-hand how the processes can differ in both corporate and startup settings. 


Here are my takeaways and tips for founders seeking to buy or merge with other startups.

The human component matters most

M&As are commonplace for large corporate businesses, but for startups and their founders they're often uncharted territory and require greater sensitivity. Many startup founders have personal ties to their company, and selling it is an emotional process. You therefore can't think of the M&A as merely transactional — you have to put yourself in the shoes of the seller.

Building trust is essential. You have to hold founders' hands throughout the M&A process, ask what their needs are, explain things step by step, and remember that they will feel a heavy responsibility to their team. Set up regular check-ins with them, invite them to your offices and team events, create a culture roadmap, be completely transparent about your intentions, and constantly reassure them why the M&A is the right step.

You should expect to dedicate at least 10% of your working week time to nurturing this trust with founders, and you should anticipate that the deal won't be sealed without meeting in person multiple times. 

You don't need bankers, but you do need lawyers

Unlike corporations that have a sea of consultants, advisers and bankers facilitating M&As, your startup's in-house team should be able to take charge of logistics. Due diligence and financial tasks can be completed by your accounting department, but you will need an external legal team to get involved at the contract stage.

A founder will always be unrealistic about the financial worth of their company

Ideally, you want to have everything in place before you bring lawyers on board. You can definitely include them when negotiating, but they won't necessarily know the business specifics. The contract is where they can help you most because they will identify any compliance issues, loopholes or terms that could hurt you down the road. For example, lawyers can clarify if you're buying a startup as a business asset or the business shares (the latter means you'll be liable for the company's past).

Don't try to talk down the founder’s price

The negotiation phase of any M&A is extremely delicate. In fact, the majority of M&A discussions break down at this point. 

A founder will always be unrealistic about the financial worth of their company (especially if they've built it from the ground up), but it doesn't make sense to try and convince them otherwise. Direct counteroffers can work for corporations, but outwardly challenging a founder's valuation won't do you any favours. Instead, you need to demonstrate what you're bringing to the table and frame the negotiation as a value exchange.

In my past M&As, I've taken the route of saying "I'm sure the company is worth X, but can I explain how we look at things?" or "Because we'll be bringing XYZ to the company, this price works for us." The idea isn't to dismiss the founder's estimation but to shine a light on what your company and you as a founder will add to the business. 

Signing the dotted line is just the start

Sealing the deal is not the end of an M&A. You need a specific onboarding plan to integrate the new team and avoid retention losses that are particularly damaging for startup teams. That preparation involves both your organisation and the acquired organisation.

Start by defining a management team that will be responsible for the success of the integration. These individuals should have specific KPIs: for instance, the number of people signing up for events, training and company schemes. If personnel changes have to be made, they should be done quickly and communicated company-wide ASAP. 


You as the founder have to prepare yourself too. Clear your agenda for the weeks following the contract signing. Make sure you put in a lot of facetime at the office — walk around common areas and host open Q&A sessions. Make yourself the glue between new and existing members. 

The biggest component of startup M&As is being people-centric. Whereas individuals get lost in the crowd of corporations, the reduced size and intimacy of startups means you have to be compassionate when bringing two passion-driven projects together. Keep people the priority and you'll be in a much better position to close a sustainable M&A deal.

Álvaro Gutiérrez is cofounder and co-CEO of Barkibu.