How to Execute Product-Based Acquisitions

There are many different reasons why companies buy other entities. Traditionally, acquirers have focused more on the financial aspect of the target company. However, experience has shown that not all acquisitions are the same, and must be executed properly against their strategy. In this article, we discuss how to execute product-based acquisitions featuring Andrew Morbitzer, VP/Head of Corporate Development at Typeform.

“When executing a product-based acquisition, it should be the same people going all the way through the formal diligence over into integration planning and integration execution.” - Andrew Morbitzer

Product-based acquisitions

When it comes to product-based acquisitions, product fit must be the priority. Before a target company can even be considered, its product should have the ability to accelerate the company’s strategy. This includes the engineers that developed the product. It’s crucial to have the same people on diligence doing the integration to ensure everything revolves around the product. 

Assessing product fit

1. Measure customer love metrics - Evaluate the net promoter score to gauge customer satisfaction and loyalty. This involves conducting a net promoter survey for each potential acquisition and scrutinizing the customer's overall experience with the product and company. 

2. Perform direct observation of customers - Maintain relationships with customers that opted into research to help make the products better. Make sure to have qualitative and quantitative data. This will help build confidence and credibility, and use them to convince others of the merits of the acquisition.

3. Prove scalability - Look for proof that the product or service will scale effectively. 

4. Read reviews - Read marketplace reviews by actual customers rather than professional critics or paid lists. Services like G2 are recommended for unfiltered customer feedback. This helps to get an accurate view of the company's performance over time.

Proactive approach

According to Andrew, when it comes to product-based acquisitions, it has to be 100% proactive. The acquiring entity must be the one initiating the transaction in order for it to be successful. A proactive approach aligns the company strategy, product strategy, and M&A strategy, setting up the entire deal for success.

A product-based acquisition strategy that relies on a reactive approach or one that bends strategy based on opportunities that emerge over time is less likely to yield fruitful results.