5
Preparing the Company's Pitchbook

Your company's pitchbook or acquisition memorandum is a vital piece of the puzzle for achieving the best possible exit. Like a pitch deck in equity fundraising, a pitchbook is about presenting your business and the opportunity, and selling both.

If you're thinking you've become pretty adept at whipping up pitch decks to raise capital on the fly and so the pitchbook will be a breeze, you should know that creating a pitchbook is a little more in-depth.

You'll have more to present, and the expectations of readers will be much higher. You may not be running ads or putting a for sale sign in your window, but your pitchbook is your chance to make the pitch and present the vision of the outcome of your companies working together to create value.

Packaging the Message

So how do you package all of your pertinent information, the data on your company, and deliver a subtle sales pitch?

Aside from more sensitive and in-depth data (which should be uploaded to your deal room in the cloud with revocable access), the best way to convey all of the necessary information is in a slide format, similar to a pitch deck.

Although effective pitch decks have become more condensed and simplified, when you get to the stage of selling your business, your presentation will need to have a lot more meat on the bone.

As a starting point, consider that you now probably have a lot more hard data and information to share versus when you first floated your idea in your deck for your pre-seed round.

Then, you want to consider that the viewers of your pitchbook are also far more focused on facts, data, and numbers than early-stage startup investors riding on the vapor of your vision and optimism.

However, don't overlook the ability to make your offering much more compelling, sticky, and valuable by creating a new vision of what could be for your acquirer. There is still a lot of art of the sale at this juncture. Don't throw away millions by neglecting the opportunity.

What Makes Your Company Unique?

There are millions of companies out there. There are probably at least thousands in your industry. Even in your product and technology and position in the supply chain, there are probably at least dozens, if not hundreds, of potentially qualified companies. So what makes your company unique?

Buyers have options (including just building it themselves), so what is so special about your business that you should be the one they spend so much time and money on?

By now, you should have your unique selling proposition definitively nailed when it comes to your customers and selling your product or service. It's a crucial factor at this point in the life of your company as well. Are you faster, leaner, cheaper, more loved, or more efficient? What is it that your competition can't say about themselves and match you on?

In this context, it is also important to clearly convey what is unique, particularly valuable, and exclusive about your business as a potential acquisition and asset. What are your buyers going to get from acquiring you that they won't get elsewhere? What is that unique thing they can only gain from buying your company over the competition? What is your competitive advantage in this context?

Here are some examples of the aspects that may apply here:

  • Your team
  • Your trademarked and patented technology
  • Your customer base and relationship with them
  • Your data
  • What you've de-risked
  • Your proven ability to work well with their company
  • Your track record of success

Nailing the Value Proposition for Potential Acquirers

The value proposition for potential acquirers should be much more than just acquiring your existing assets.

If you are profitable and cash is flowing well, there can be some tentative value in those returns for financial buyers. If your company is a purely asset-based purchase, even if it comes down to income streams and returns, it becomes about discounts. How much less can they buy your assets and company for than it's worth to lock in profit and insulate against risk? If this is your only sales pitch, it is pretty obvious that the whole conversation and post–term sheet negotiations are going to be focused on how they can drive down that price and buy you cheap. That isn't the direction you want to head in.

Even in a fire sale situation, on the doorstep of bankruptcy, you want to maximize the outcome as much as possible.

This is where the real art of deal-making and selling a business comes in.

Eight, nine, or ten figures can be added to the valuation of your company and the deal by really nailing the value proposition.

This is a pain-to-pleasure equation. What pain are they in that they need a painkiller for? What pain are they going to be in that they will need a cure for at any cost, in the near future, if they don't act now?

What pleasure do they seek? How can acquiring your company help them achieve their goals and aspirations—not only in how the stock market is going to react over the next few quarters but also in the grand scheme of things and the long term for their company?

It is also important to keep in mind here that these are still humans you are engaging with. All of them have their own ego, fears, pains, and aspirations. They don't want to mess up in front of their bosses or board. They do want to look smart and be praised for making great moves.

A big part of the pitchbook, maybe 30 percent or more, is forecasting a vision and modeling the fantastic upside potential of this merger or acquisition deal.

Be sure you are laying this out in line with their goals, strategies, and plans, not yours. But be sure to paint a very vivid picture of what the outcome can be, at its best.

Here are some of the key points you may want to make here based on the individual situation:

  • How you can save their brand from becoming crusty and irrelevant and help them become hot and respected again
  • The competitive advantages you can secure for their company
  • The rate of growth, revenues, and profitability you can add for them

Defining Transition Plans for Potential Buyers

Don't be so consumed with making a deal and getting to closing that you overlook post-closing. This is where the real make-or-break is.

Acquirers know this. They also know you may be distracted with the rest of the process. A significant percentage of your payday may actually rely on post-closing performance, integration, and the ability to reach the goals set for the next few years.

It's not just about the money, either. This is where your company can get chopped up and broken into pieces, or folded and discarded, along with your mission and vision.

Showing that you've thought through this next phase in advance will say a lot about you as a leader. They won't see you as an easy target to take advantage of. It also shows that you are serious about making this acquisition a success for them after the sale.

They may well have their own ideas and plans for merging and absorbing your company and its assets and people, and many of these elements can change once the company is handed off to new teams within their organization. However, it is still valuable to take the time to lay out a potential path, or paths, for the next phase.

Much of this may be embodied in a transitional services agreement, which lays out factors such as these:

  • The services each party will provide post-closing
  • Who will cover the costs of this transition
  • What third parties may be involved and who chooses them
  • What happens to rights, data, and so on
  • The ability to review and audit
  • How defaults on this agreement and its provisions will be escalated and the penalties
  • Who assumes which liabilities
  • Wind-down plans

Do not leave these things to chance. Be sure they are being negotiated early. It is all a part of knowing your real exit from this arrangement before you get into it.

Crafting the Marketing Plan

If you are serious about pulling off an exit and the timing is right, then you can't afford to be too passive. You need to have a marketing budget and a highly talented team of creatives to tell the right story about the right data points and triggers.

A successful campaign always starts with a well-thought-out research strategy and plan. This isn't one of those times when you can afford to just throw things against the wall on a whim and keep iterating and optimizing for the next few years. That time luxury isn't available, and the execution can mean a difference of tens of millions of dollars and a lot more.

This requires a subtle strategy. Not passive, but subtle. You aren't overtly advertising your business for sale.

You are subconsciously planting the idea that they should buy your company, that this is the best time for them to do it. Plant the fear of missing out if they don't hustle and do something about it.

Do this with branding and be in their face, dropping the right clues that this is the best value time to acquire your company, and some type of exit is imminent—if not to them, then one of their competitors. So make sure you include the right contact information if you want to get follow-through. Get them to compete over you.

Start with your research to best reach your target list of acquirers. Where are they? What do they read? When is the best time to get in front of them?

Here are some of the ways you may achieve this:

  • Email updates
  • Blogs
  • Press releases
  • Guest appearances on podcasts
  • Advertorials
  • Social media: LinkedIn, Twitter, and popular industry-specific platforms

Identifying a Powerful Flow and Structure

What does a great pitchbook or acquisition memorandum look like?

Flow and structure are incredibly important. You need to include all of the expected information, and you need to make sure everything is correct. Be sure to leave out all other facts that are just going to bog inquirers down or turn them off at this point.

As with a fundraising pitch deck, just having the right information isn't enough. The information has to flow in the right order. You might have all of the pieces of a puzzle spread out on the floor, but it doesn't make a great picture unless they are put together correctly. Or you can have all the right wiring and all of the right types of switches to wire your office building, but if they are connected by an unlicensed amateur over the weekend, it can be a very dangerous disaster waiting to happen.

An acquisition memorandum can be broken down into three sections:

  • Current status. What's going on with your company? What is the asset?
  • The problem. What is the acquirer's problem that you can solve?
  • The solution. How does a merger or acquisition provide a solution, and how great is it?

If you're using a vertical PDF or printed paper layout, use short paragraphs to break things up. If you are opting for a more modern slide presentation–based layout, you'll be working horizontally, and you'll need to use short statements and bullet points.

Select a background, color scheme, and font that fits your company brand. Use plenty of pictures to keep it interesting for the reader (and charts and diagrams, too, of course).

Acquisition Memorandum Template

This acquisition memorandum template1 is adapted from the pitchbook template published on my website, along with many other business templates and forms for startups.2

There are a number of slides to include in your acquisition memorandum:

  • Cover slide
  • Disclosures
  • Table of contents
  • Executive summary
  • Market opportunity
  • Solution
  • Target market
  • Competition and advantages
  • Market traction
  • Financial results and projections
  • Executive team
  • Technology platform
  • Marketing and sales
  • Business history
  • Reason for the sale
  • Buyer qualifications
  • Directions for the LOI

The following sections examine these slides more closely.

Cover Slide

Be sure to include your contact information, company name, and brand image. The cover slide is like a movie trailer for your acquirer. You want this slide to set up expectations so that viewers get an idea of what they are going to review, and you want to illustrate that the movie will be something that they might find interesting. Try to go the extra mile with a powerful design—use visuals that tell what you are doing right away.

Keep in mind that more companies are using horizontal slides for the acquisition memorandum. If you use the vertical format, you want to make sure the headers are the same. With the horizontal format, you want to use more bullets and short statements, whereas with the vertical format, it is better to go with short paragraphs.

Disclosures

Be sure to include the necessary disclosures pages that your M&A attorney will insist on. The disclosures could take up to three slides, but to cover your back, you want to include whatever is necessary.

Table of Contents

Make your acquisition memorandum more easily navigable and show them what you've included. This way, if they want to jump quickly to a section that may be of more interest, they can easily navigate through the document.

Executive Summary

Sum it all up in the executive summary. This can be tailored to each potential acquirer. This is the page that will determine whether they keep reading or not.

Market Opportunity

Allow for two to three slides in this section, as needed. Use graphics and big data points. Include interesting facts and stats they may not yet be aware of. Here you want to talk about timing and why your company is at the right time in history.

Solution

This may be broken down into three to five slides, explaining your business and the solution it is providing.

  • What is the product or service?
  • How does it work?
  • How do you make money?
  • What is the business model?

Keep it very simple. Use flowcharts and images.

Target Market

Who is the addressable market? How big is it? How much is it growing?

Competition and Advantages

This may be very similar to your SWOT analysis and competitor slide in your fundraising pitch deck. Make sure you adjust it to be most relevant for the M&A context. Use a graphic.

Market Traction

Allow for two to three pages of financial metrics and KPIs and highlight your growth, milestones, customer acquisition volume, revenues, and so on.

Financial Results and Projections

Display your past three years of historical financial data, followed by your next five years of financial projections for your company as is, and with current plans.

Then, you may display financial models and projections of what could be possible with partnership, merger, or acquisition with the party.

Try to avoid including screenshots from your financial model. Instead, extract that data into beautiful slides showing the information in a way that potential acquirers can digest easily.

Executive Team

Allow one to two slides to present your executive team. Use headshots, titles, names, and a one- or two-sentence bio.

Your team is going to be a critical asset. Make sure you are capturing why you have the right people in the right seats. Talk about prior experiences as well as accomplishments.

Technology Platform

List the technology being used in your stack. Potential buyers will be most interested in the split between how much of the tech is leased from other companies or open-sourced versus the proprietary tech that has tangible value, what you have built, and the IP that you have the rights to sell.

Potential buyers may want to bring in technical advisors for review, so the more you describe the key components, the better.

Marketing and Sales

Use images or bullet points to explain your sales and marketing strategy and channels. What are your methods of customer acquisition?

This may also be an opportunity to show the advantages of merging your companies and the additional efficiencies, value, and profits from making a deal.

Hopefully if you do a good job with this slide, the potential buyers may start to dream about what it could look like if you were under their umbrella. They may also contemplate how your competitive advantage could help catapult some of their other initiatives.

Business History

Include a quick time line of your company history. When did you start? What are the notable milestones you've accomplished?

You could even follow this with a road map of some of the plans you had in place.

Reason for the Sale

Why are you selling or willing to sell your company now? Are you selling because you've hit a ceiling? Are you struggling financially? Or do you see a more efficient path to growth and realizing your vision?

You want to be careful here. Potential buyers are always going in with the lens of “What is wrong with this business?” You want to avoid feeding that worry.

The facts are always the facts. But the way you deliver them is what makes all the difference.

Buyer Qualifications

What qualifications should acceptable buyers have? Who are you interested in speaking to about them? Who is a good fit? Will you just be wasting their time?

Directions for the LOI

What steps should the viewers take to show interest in acquiring your startup? Whom exactly should they contact to begin the conversation and ask questions, and how should they contact them?

Notes

  1. 1 https://alejandrocremades.com/aquisition-memorandum-template/
  2. 2 https://alejandrocremades.com/business-templates/
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