Fundraising
M&A (Mergers and Acquisitions)
Transactions where one company combines with or buys another. From the founder's side, almost always 'acquisition' — selling the company to a buyer.
In plain English
Someone bigger buys your company. Could be a strategic (a competitor or adjacent player who wants your team, product, or customers) or financial (PE buying for cash flow).
Example
A B2B SaaS doing $10M ARR is acquired by a larger SaaS player for $80M. Structure: $60M cash up front, $20M earn-out tied to revenue milestones over 2 years. Founders' shares cash out at the close; founders sign a 3-year retention agreement with new RSUs.
Why it matters
M&A is the most common positive outcome for founders. ~95% of startup 'exits' are acquisitions, not IPOs. Understanding the mechanics (deal structures, earnouts, retention packages, holdbacks, escrow) matters from the moment you start the process — usually 6-12 months before the deal closes.
Common mistakes
- Running a single-buyer process — kills your negotiating leverage; almost always engage a banker or run a parallel process
- Accepting earnouts that depend on factors you no longer control after the close — the new owner can manipulate them
- Not modelling the tax outcome — installment sales, QSBS (US), Business Asset Disposal Relief (UK) all change the after-tax number dramatically
- Hiding the M&A conversation from the board until a term sheet exists — investors will be more helpful than expected, and surprises destroy trust
- Telling the team too late — discovery of M&A talks by leak creates retention problems mid-deal