The best advice to technopreneurs is that exiting your company should be the culmination of an ongoing “strategic outreach” throughout the life of your company, and not something that only begins when you start thinking of exiting. It’s about using the clear understanding of your company’s unique strengths as a basis to build bridges that could become exit ramps.

Financial (VC and PE) investors understand this, and are usually thinking about this profoundly when making an investment decision. The good ones will make this strategic outreach part of their ongoing value-add for their portfolio companies (and by extension, for themselves).

What do we mean by strategic outreach and why is it important?

Strategic outreach is an investment in systematically mapping and networking your ecosystem, including  “adjacent companies” such as existing and potential suppliers, customers, competitors and partners. This should be done consciously, understanding why these players (both large and small) might find your company attractive.

It is the ultimate strategic exercise as these interactions help to crystalise your unique positioning and can even help to inform your organic growth strategy. Most importantly, it helps you to identify and act on the transformational opportunities that come along (not too often) through the life of your company, that can dramatically change the outcome of your company, such an acquisition, merger or sale.

And you will be well prepared when you decide that it is time to sell, knowing who the likely strategic acquirers are, and why. You will have built some bridges and these players would have some idea of what your company could do for them.

In my 2018 article (which still holds) Go for the “strategic” exit, I explain why you are more likely to get a better valuation from a strategic acquirer than a financial acquirer – they usually have a lower cost of capital and they can justify  a higher valuation due to the synergies built into the strategic rationale.

One of the oldest maxims in M&A is that “companies are bought not sold”, meaning that acquirers must genuinely want to buy the company. Therefore, once the decision is made to go on a path to exit, it is time to up the ante in your strategic outreach, with the help of an M&A advisor.

This means positioning your company for each strategic target (building on the previous work), and engaging with them to elaborate on what the acquisition could do for them,  so that they are genuinely excited about  acquiring your company, in order to get a premium valuation. For example, this could be acquiring a new technology or product that they could sell into their existing base, or could enable a new customer segment or geography, or could represent a solution to a problem that they need solving, or could be as simple as “taking out a competitor”.

If you have financial investors in the company, they may have helped with the ongoing strategic outreach, but they are not ideally placed as shareholders to conduct the transaction itself, given that each shareholder will have their agenda, as per our recent article Do I need an advisor if I have M&A experienced board members? Better to have an advisor to provide a professional and impartial service to the Board and shareholders for their deliberation.

If your company is not engaged in the ongoing strategic outreach, now is the time to start. Not only will you be better able to identify and execute on transformational opportunities along the way, but you will be much better prepared when you are ready to exit.