Even if you have no plans to sell your business, it’s nice to be approached by an acquirer. Having acquirers court you can help identify which parts of your business are most attractive and where any weak points might be. That way, you can shore them up before putting your company on the market.
Getting approached by an acquirer also means you have the ultimate negotiating leverage. Engage in the conversation if the terms are attractive, and ignore them if the offer falls short.
How do you get on the radar of a potential acquirer without undermining your negotiating leverage by approaching them? One of the most powerful strategies is to focus on the volume and quality of your online reviews.
Whether you own a store and get Google reviews, a restaurant, and get Yelp! Reviews or a software company and your customer accolades are published on Capterra, real customer reviews are hard to fully game, but they can catch the attention of an acquisitive competitor if your business starts outranking theirs on customer feedback.
For example, Eddie Whittingham started a company called the Defense Works in 2016. His idea was to provide companies with information on how to avoid getting hacked. Whittingham created a series of animated video clips explaining cyber security best practices and offered his content on a subscription model to companies.
In 2020 Whittingham noticed a competitor named Proofpoint had attracted a billion-dollar valuation and was making acquisitions. Whittingham wanted a way to get on Proofpoint’s radar without going to them with hat in hand.
Whittingham decided to focus on getting his customers to rate the Defense Works on Gartner Peer Insights, a review site enterprise customers often turn to for ratings before buying solutions like the cyber security subscription the Defense Works offers. Whittingham reasoned that if the Defense Works was able to get a lot of reviews quickly, Proofpoint would be likely to notice their new rival and reach out about an acquisition.
Whittingham set out to execute his clandestine strategy. He designed a sequence of three emails to his customers asking them to review the Defense Works. If the customer did not write a review, Whittingham dispatched one of his customer service representatives to call. If that didn’t work, Whittingham himself called the customer to ask.
The five-touch strategy worked, and the Defense Works was able to get roughly 75% of its subscribers to review their business. Suddenly the Defense Works looked like the industry darling with momentum. Within weeks, the Defense Works had attracted inbound inquiries from Proofpoint and another billion-dollar giant. After a few rounds of negotiation, Whittingham agreed to be acquired by Proofpoint for ten times his subscription revenue.
If you’d like the negotiating leverage that comes from being courted by an acquirer, make sure dominating your category’s online reviews is part of your value-building strategy.