What better moment to talk about what company acquisitions are than now?

SeedBlink recently announced the acquisition of Symbid to consolidate its position in European Innovation and expand its network of venture business partners in Western Europe. So, we'll be looking at the topic inside-out, starting from what the process means, the role and impact on both parties, and everything else you need to know about it.

Acquiring a company seems scary, especially for employees and a company's customers. However, this strategic action creates growth opportunities for the organization and its people when done right.

Curious to see how acquiring a company rolls out multiple benefits for your startup? Let's discover together what the process of acquisitions means and how SeedBlink joined forces with Symbid to create a better place for European startup funding.

What are company acquisitions

An acquisition happens when one company joins forces with another by purchasing all (or the majority) of its shares. The transaction occurs when you are acquiring +50% of the target company's shares and taking over the company's control.

In startups backed by angel investors or VCs, the process takes place with the help of the board, which guides founders in making the best decisions. The acquisition is also considered an exit strategy, as some investors choose to sell their shares during this process.

Going through acquisition has an impact on multiple departments and people involved. Let's take a quick journey through some of the biggest reasons founders approach this strategy and what it offers to the parties involved.

An acquisition takes place when the minority stakes are exchanged, and the company control is taken over by one of both parties. There is a fine line between mergers and acquisitions, and it's represented by who controls the management of future strategies.

The most crucial element in this process, whether a merger or an acquisition, is the partnership between both parties. This should be a solid one, regardless of the size of the transaction, and everyone should learn what works from the other side. Otherwise, the transaction is useless, and the integration between the two companies fails. This happens in most cases when the transaction is followed by founders or executive members leaving the company.

Is the purpose of the acquisition more than taking over the licence? Are founders leaving the team? If the answer is yes, it's a sign of a weak acquisition, and you fail to create enough value through it.

How does the process of a company acquisition look like?

If you are preparing to go through an acquisition process for the first time, here you can find a brief version of what it looks like.

Consideration phase

Acquiring a company can't start before outlining the main reasons why this strategy brings the best opportunities. So, take the time to find out everything you need to know about how this process will transform your company and why you need it in the first place.

On top of this, discuss this procedure with the other parties involved, such as the company acquired, founders, investors, and anyone else who's part of the process.

Due diligence

Once all parties are on board with the process, start your due diligence process to prepare the business. This is the moment to analyze all the legal and financial aspects, how to prepare your company for it, and what could impact this procedure.

Legal and financial audit

Whether we want it or not, each acquisition process has a set of legal and financial actions that need to be completed for it to be successful. You have to check all the local and applicable regulations, prepare all the necessary documents, and gather financial reports, bank statements, revenue reports, and any other financial data that could impact the acquisition.

The process of due diligence is vital and should have everyone's attention on it. When we are talking about a potential transaction, multiple buyers are initially involved. Each part is doing its evaluation and comes up with a proposal, including several conditions for the transaction to take place.

Sometimes, there is a considerable difference between buyers' proposals. This usually comes from how the synergies between parties are seen and how the business is analyzed. These two elements show the potential to generate value and the price of the transaction. There is a golden rule when acquiring a company, which usually differentiates between buyers and the price offered during the evaluation.

Those analyzing the company are recommended to have zero enthusiasm about it, and the negative sides shouldn't be discounted for the benefit of positive parties.

Often, the end buyer is not the ideal one, even if the market determines the price, and the ideal buyer is the one that pays the most.

Internal preparations during pre-acquisition

Before the company acquisition, the people involved in the process need information about what will happen. Each company goes through a phase of informing its internal teams about what it will change, the plan for those changes, and how long it will take.

This process needs time and involves different people from different departments. You wish for a smooth transition behind the transaction and have all your employees on board and comfortable with the new changes.

Regardless of the composition of the integration teams from both sides, the best solution is to have the following two members involved who are responsible for leading a successful acquisition :

• A project manager
• A sponsorship of the transaction

This way, the responsibility dissipates among the members and various teams. If someone wants to identify it, they either find a guilty member or no one at all.

Joining forces

With all the resources in place, you only need an official date to sign the papers and announce them publicly. This is when you mark down the achievement of your previous preparations and the start of a new journey ahead.

Usually, two important moments have an impact on this process. One moment is when the contract of acquisition is signed, and the following one is when the transaction is finally closed. Between these two moments, you are concentrating on fulfilling the pre-closing terms and conditions. Sometimes, there are a few port-closing terms, but those usually do not significantly impact the transaction itself.

Things to consider before the acquisition:

• What's the primary reason why the company is accepting the deal?
• Is the company acquiring a good fit for this startup?
• Can founders scale the business operations?
• Does it help the business attract capital faster in the future?
• Any other reason to sign a solid partnership between the two parties?

At the same time, the acquisition process outlines what happens next for the business itself and founders, investors, and anyone else involved.

Advantages of acquisitions

The reason behind a founder looking to acquire another company differs in each situation. Everything is an option, from diversification strategies to accumulating a greater market share, reducing production costs, and approaching a new industry sector.

Sometimes, the transaction's purpose is market or business consolidation. For SeedBlink x Symbid, we were focused on consolidating the geographical expansion across other European areas where the investment culture is still locally-driven and quite different from other cultures. This is a challenge that the following acquisitions would also try to resolve.

Entering a new market sector

When a startup expands internationally, it's more likely that sooner or later, it will enter new markets and address the needs of a new type of customer. In this case, acquiring an existing company established in that local market can be your best option as a founder from a timing and financial perspective.

The company acquired is already positioned in the customer's mind, expands the functionalities of your product, knows the local culture, and has the right people in the right place. These elements represent a strong foundation ready to help you scale your business operations.

Greater market share to enhance business growth

As a founder, when dealing with fewer resources and increased demand from your customer base, you need quick solutions to adapt. Acquiring a company helps you diversify your product offering and add a new revenue stream to your business.

In this case, as a founder, you are looking for similar companies alongside which you can scale your product and overcome your competition.

Expand product offering and reduce production costs

In some cases, acquiring a company helps founders improve their product by bringing in new functionalities or technology. If the company acquired already has all the systems in place, it is faster and more efficient to buy it, rather than spending time and resources to develop it from scratch.

This is the main reason behind joining forces with another company. Acquisitions support the creation of economies at scale, reducing the need to invest in operations to scale both businesses and determine the desire to succeed. Let's imagine ten companies with ten different platforms and ten operational devices compared to a single platform and a single operational hub serving them all.

SeedBlink & Symbid joining forces

SeedBlink is excited to announce that we are reuniting our forces with Symbid, a team of Dutch entrepreneurs who created one of the first investment crowdfunding platforms worldwide. Founded in 2011, Symbid has built a community of 50,000 investors in startups, mainly from the Benelux.

It was a natural step to form a single team with a common mission to support European startups to get easier access to funding and investors. The acquisition significantly expands SeedBlink's investor pool by increasing the high-net-worth individuals' community and includes a professional funding partners network, where Symbid is already connected with such banks, venture capital funds, and angel investors.

Read the full announcement here.