9 Lessons From An Acquisition Offer Gone Wrong
“Aric Bandy, from Minneapolis, shares his story offering nine powerful tips on what he did with a bad transaction and used that knowledge to eventually sell his business,” shares Sam Thompson a Minneapolis business broker and president of M&A firm Transitions In Business. “From hitting $10MM in revenue as a key number to investing in audited financials statements. Great advice!”
Back in 2007, Aric Bandy saw Google investing heavily to compete with Amazon Web Services (AWS) and so decided to pivot his company, Agosto. Instead of offering general IT consulting, Bandy focused on helping clients move their businesses online using something Alphabet calls the Google Cloud Platform.
The move to tie his company so tightly to a juggernaut caught the attention of a global systems integrator, which made a play to acquire Agosto. The deal fell apart, but the process caused Bandy to realize he had some flaws in his model. Instead of mourning the loss of the acquisition deal, he started building his company to sell.
In this episode of Built to Sell Radio, Bandy describes the changes they made to make Agosto more attractive to an acquirer. It worked, as he successfully sold Agosto in April 2020 to one of the leading private equity groups in the cloud services arena.
The transformation of Agosto into a sellable company gives you a unique window into what acquirers look for in the companies they buy. Bandy shares a lot of his wisdom here, including:
- Why hitting $10 million in annual revenue is an essential benchmark for your valuation
- How to calculate the rule of 40
- The difference between what a financial and strategic acquirer value (Bandy had offers from both)
- How retroactive modeling ensures a growth-oriented business doesn’t get unfairly discounted for lack of profit
- How to eliminate your personal guarantee with your bank
- The surprising role a cash forecast plays in helping an acquirer value your company
- Why it might be worth investing in audited financial statements this year
- A definition for “assignability” and why you need it in your customer contracts
- The best advice Bandy was ever given about selling a company