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February 8, 2010 02:29 PM

Categories: M&A and Financing

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Joined: 11/20/2009

Hello, this is my first post here.
I own a software company that serves the hospitality industry with mature and well developed property management and restaurant point of sale systems.
I believe my company would be most valuable to one of my competitors or a company in the same industry with which out product could fill a gap in their product line.
The challenge is, how do I discreetly find potential acquirers without sending the wrong message to my industry?
Is there an effective way to contact these companies directly.

Discussion:    Add a Comment | Comments 1-2 of 2 | Latest Comment

February 8, 2010 3:00 PM

Hi Wayne, Welcome.

The most common approach to your question would be to engage an advisor who can make such inquiries on your behalf and initially without disclosing the name of the company, which would only be disclosed under NDA once interest in pursuing the discussion was confirmed with potential buyers. Also, in this approach you can prioritize with the advisor whom to contact in what sequence thus for example leaving the most direct competitors to the end of the list and only contacting them if needed.

Another idea if you want to do all of this yourself is to approach the companies, again I would suggest prioritizing them first, and initiate discussions in terms of some form of partnership or cooperation angle. Once you've established some connection and level of discussion, the other party might first raise the idea of an acquisition or you can do it at an appropriate time and again after having put an NDA in place (which you should do anyway even if partnership discussion is the first step).

Also, in reality it can be very difficult to keep such discussions totally quiet as at some point you will have to start talking about a sale with one or more
parties and there is some level of risk that the "word will leak out a bit". That is a risk that you should recognize in pursuing such discussions, there is a level of risk.

Thus, using a 3rd party to start and manage the process and getting to know whom you are talking to a bit more before you disclose too much as well as prioritizing the list and sequence are all good ways to try and minimize the list, whether you use a 3rd party or not. And no matter what, get an NDA in place before to talk too much about anything.


February 8, 2010 3:04 PM

The approach I've historically used is to contact the target companies and to say you're looking for "partners." You can then explain your product and describe that sometimes your product needs to be part of a broader sale. You can then understand the target company's products to see if they are complementary and let them know that you'll let them know if you see any sales opportunities for their product if they can do the same for you.

Once you get to know this target company in this way, you'll be able to identify whether there are opportunities for greater synergy and perhaps they might want to acquire your company. In my experience, the process is a bit like dating. You need to get to know each other first before you make any further moves.

Discussion:    Add a Comment | Comments 1-2 of 2 | Latest Comment

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