When and how to sell your company 🤝

Hello, and welcome back to another edition of The Wise Exit!

In today’s newsletter:

• 3 lessons about how and when to sell your company from Daniel Lewis ✍️

• The newest episode of the Cashing Out podcast 🎧

• Our round-up of interesting M&A transactions from the past week 💰

Let’s dive in!

At 26 years old, Daniel Lewis founded the venture-backed legal analytics startup, Ravel.

5 years later, wearing thin from the rollercoaster of highs and lows, he sold the business to a company he had initially set out to disrupt, LexisNexis.

Last year, Daniel shared the lessons he learned from that exit in a LinkedIn article. Today we’re going to share three of his top lessons that can span any industry.

M&A Lesson 1: When to sell in uncertain times 🤔

One of the many reasons that Daniel was successful in selling his business was his ability to consider the economics of the deal. He asked himself some key “why now?” questions that helped mitigate the changing economic climate and the place that his business existed in the industry. Some of the questions Daniel faced:

• Does selling now give you and your shareholders the best outcome?

• Can you draw on recent and notable press/industry coverage? Have you had an exceptional year or reached an important milestone?

• If not now, can you continue to grow the business and valuation of the company in preparation for a future sale? What timeline is reasonable? Can you guarantee what the future holds?

He also cautions about delaying the sale if you need additional outside capital to help you get to an increased valuation: this “will dilute you and set a higher minimum valuation threshold — and will a better future valuation make up for that dilution?”

M&A Lesson 2: How to sell while running your company 💼

Discussing the sale with potential buyers can be exciting, but it’s also a distraction from running the daily operations of your company.

As Daniel warns, “If the business goes downhill while you’re selling it, your valuation can suffer or the deal may fall apart.”

So how do you minimize the distraction?

• Continue the day-to-day as usual, as though no deal will happen (until it does).

• Only involve a small group of employees (think single digits) so that there isn’t a large morale hit if the deal doesn’t go through.

M&A Lesson 3: How the sale will affect you, your family and your staff 👪

Daniel recommends getting self-reflective and personal before negotiating a sale. Think about your current work-life balance, family life, health and personal goals. Do you think you’re ready to sell or is it appealing to push forward?

Think about your team: Are employees ready or even looking forward to the changes an acquisition might bring? Are they capable of tackling what’s ahead with the status quo or would a sale help them achieve more or give them additional opportunities for personal growth?

And finally, the acquisition is not an end but another beginning – one where you might stay for 2 or 3 years. How will you and your employees fit into this new company? How will you deal with having a boss? Try to picture a future after the sale and whether it fits with what you want for yourself and your team.

Cashing Out: The Series A Term Sheet That Created An Incredible Exit

Austin Ogilvie is a former machine learning product manager who went on to sell his data science and decision management platform, Yhat, to one of its rivals.

In our discussion with Austin, we cover:

• How to turn a Series A Term Sheet into multiple growth and exit options

• The value of seeking guidance from seasoned CEOs and professionals who have gone through the M&A process in order to structure the right agreements

• Being critically organized with your startup's Employee Agreements, Client Contracts, and Company financials

M&A News 📰

• Cybersecurity: Cloud security leader CrowdStrike acquires Bionic, the pioneer of Application Security Posture Management (ASPM).

• AgTech: Industry leader for sustainable, hyper-local and ultra-fresh food production, Freight Farms, has entered into a definitive business combination agreement with Agrinam Acquisition Corporation for a combined entity of approximately US$147 million.

• Food & Beverage: Tilray Brands, a global cannabis-lifestyle and consumer packaged goods company, has acquired 8 beer and beverage brands from Anheuser-Busch, putting them on track to be the 5th largest craft beer business in the US.

• Insurance: With a purchase price of US$170 million, iA Financial Corporation is set to acquire life insurance provider Vericity in an all-cash transaction.

That’s it for this week.

Tune in next Wednesday for another set of M&A lessons, and have a great rest of the week 👋