Setting Up M&A for Hyper-Growth Companies

M&A is a game-changing tool that can propel a company's growth several years ahead of schedule. However, for hyper-growth companies, M&A can also be a double-edged sword that leads to attrition and detracts from the core business objectives. 

In this article, Michael Nov, the Head of Corporate Development & Chief of Staff to the CTO at OwnBackup, shares valuable insights on setting up M&A for hyper-growth companies.

“If you're thinking about M&A and the product is not on your three-year roadmap, you're doing it wrong.”- Michael Nov

M&A for hyper-growth companies

Hyper-growth companies are those with a compound annual growth rate (CAGR) of 40% or greater. In a hyper-growth company, the M&A strategy must align with the product roadmap and add value to the company. Hyper-growth companies must focus on four critical areas when considering M&A:

Product roadmap

The product roadmap is the driving force behind the company's success. Therefore, having a clear understanding of how M&A fits into the bigger picture is essential. 

Good leadership that doesn't deviate from the product roadmap is crucial to prevent distractions and the corporate development team must know the product well. Michael suggests that it's better to have a passionate product expert than an M&A specialist.

Hiring key individuals

When hiring key individuals, identify those who have an interest in and an aptitude for understanding the product and market operations. While M&A knowledge is critical, hiring a finance person or an analyst to do the modeling is always an option. The priority is to find individuals who can contribute to the product roadmap.

Build, Buy, or Partner Analysis

After analyzing the product roadmap, identify where the company needs support. M&A can bridge gaps in expertise. Evaluate whether it's best to purchase a firm, partner with one, or develop the product internally.

Sourcing deals

Sourcing deals should come from three primary areas: the product team, VCs, and investors with aligned interests. Additionally, educating the executive team on how the deal will affect their roles is crucial since they are the ones managing the assets. The acquisition won't be successful if they are not informed early.

In conclusion, M&A can be a powerful tool that enables hyper-growth companies to reach their goals faster. But to unlock the full potential, companies must align M&A with their product roadmap, hire individuals who can contribute to the product roadmap, evaluate whether to build, buy, or partner, and source deals from the right channels.