Alvaro Gutierrez is the co-founder and CEO of Barkibuwho uses data to make animal care better, more affordable, and more personalized. Alvaro began his M&A acquisition finance career at JP Morgan before co-founding Spanish pet retail giant Kiwoko, which in turn acquired 12 other companies and was eventually sold five times.
When startup founders When we think of mergers and acquisitions (M&A), we tend to think of Mad Men-esque processes that involve dramatic office restructuring and expensive renaming. The reality, however, is that M&A is not limited to flashy corporate deals, nor does it have to permeate corporate culture.
In fact, since the beginning of 2021, 530 out of 530 startup acquisitions have been made more than the half were startups that bought other startups. More and more companies in the early stages are getting on the M&A train in order to use the technologies and talents of other startups and to absorb competitors. They also realized that deals don’t have to come with high price tags and red tape that larger companies have to deal with.
I know this firsthand from 15 years of buying and selling companies. I previously worked at JP Morgan where I supported M&A for corporate banks and I took what I learned into the startup space where I now use it to grow my businesses. I made 12 acquisitions on my Kiwoko retail platform that helped drive sales to over $ 150 million and eventually sold five times.
M&A is especially beneficial for startups struggling to scale operationally as they are essentially buying cash flow, revenue, and traffic from other companies, meaning startups are gaining a larger share of their markets. They’re also a great way for startups to find, consolidate, and experiment with their value propositions. The problem, however, is that most founders don’t know how to start with M&A and put themselves in the shadow of the bigger players. But mergers are accessible and beneficial to companies of all sizes.
The human side of M&A is always the hardest to get right.
These are my three insider tips for startup M&A:
Let your in-house team get the ball rolling
Mergers and acquisitions come with some frictional losses and costs, of course, but unlike corporations, startups don’t have to outsource employees to smooth the steps. You don’t need investment banks, advisors, legal teams, and consulting firms to make sure everything is going well.
With the help of internal resources such as accounting and lawyers, founders can conduct business and financial reviews, leverage their network and perform due diligence through trusted connections. Granted, you will need to spend a lot of time and focus in this verification phase, but it is possible and effective without attracting new players.
In addition to logistics, founders must actively analyze the value of the target company. For example, each of my acquisitions – even with significantly smaller companies – had better purchasing conditions from at least one supplier.
