Ask these 5 questions before you sell

Hi Everyone,

When a buyer tells you the deal makes "strategic sense," that phrase can mean two very different things. One buyer has mapped your company into their plan with specifics. Another is hoping things will work out after the deal closes.

McKinsey research found that when a buyer acquires a smaller company in their own industry and can name the specific gap they are filling, the deal works 80-85% of the time. When they cannot, the failure rate is much higher.

Here are five questions to put to your acquirer before you sign anything.

(If you are in conversations with a buyer right now, pick the question below that you would be most reluctant to ask. The answer (or the way they avoid it) will tell you more than another month of due diligence. If you are not in a deal yet, save this list.)

1. What capability are you filling, in one sentence?

A real answer points to something specific:

• A customer segment that they can't reach without you
• A product that they would need three years to build themselves
• An engineering team that they cannot hire on the open market
• A strong market position that would take a decade to build from scratch

A vague answer means the buyer hasn't properly thought things through.

When Salesforce bought Slack for $27.7 billion in 2021, the cross-sell story was that Salesforce would sell Slack to its existing customers. The problem was that most Slack customers were already Salesforce customers, leaving very little to sell. Three years later, growth had slowed from 11% to about 7%, and four CEOs had come and gone.

2. Can you show us where our product fits in your roadmap?

Ask to see the buyer's product roadmap with your product included. If they cannot produce one, no plan exists yet.

When Semrush bought the SEO blog Backlinko for around $5 million in 2022, they had a specific number in mind for how much extra search traffic Backlinko's content would bring to Semrush's website. Within months, they reported the deal had nearly doubled the value of that traffic.

3. Can we pick the references ourselves?

This advice comes up often from founders who have been through an acquisition. A buyer will usually offer you a curated list of past acquisitions to call. Politely accept it. Then ask for the right to find references on your own from their last two or three deals.

A buyer with a clean track record will say yes.

On those calls, ask:

• Did the acquirer follow through on what they promised at signing?
• What changed in the first six months that you did not expect?
• How long did the people you cared about end up staying?
• Would you sell to them again?

4. What does your 100-day plan look like, and who owns it?

The buyer should be able to name a specific person who will run the integration full-time, not as a side project.

Their plan should cover:

• The team structure on day one and how it changes over the first year
• How customers will be told about the deal and what they will be promised
• Which decisions stay with your team and which move to theirs
• The metrics the buyer will use to judge whether the integration is working

If they cannot show you a plan, do not expect the integration to go well.

5. Whose reputation rides on this deal?

Every acquisition has people inside the buyer whose reputations are tied to it. If those people leave, get moved, or lose budget, your deal can quietly lose momentum even if nothing about the strategic case has changed.

Ask directly:

• Who inside your company is backing this deal?
• How long have they been in their roles?
• What is tied to this deal in their compensation or targets?
• What happens to our agreement if they move on?

What bad answers sound like

If a buyer says they will figure something out after close, the work has not been done. You are being asked to trust that it will happen once they already have what they want.

"We let our acquisitions run independently" can be a sign of a thoughtful approach. It can also be a sign that no plan exists at all. The way to tell is to ask what budget and headcount support that independence. Then ask what happens to those things after year one.

When a buyer says the benefits of combining are obvious, they have not done the math. If the value were truly that easy to see, it would be in writing already.

"Trust us, we've done this before" only carries weight if they let you check. A buyer who says this and then resists letting you call founders from past deals is telling you not to look.

When to walk away

If the buyer cannot answer three of these five questions with real specifics, the deal is not ready. The price might be, but the plan is not.

The number on the term sheet stops mattering once your team has left or your product has been shelved.

Go deeper

👉 McKinsey: Five steps to strengthen M&A capabilities, no matter the starting point – what experienced acquirers do that one-time buyers do not, useful for spotting which kind of buyer you are dealing with

👉 Harvard Business Review: A Better Approach to Mergers and Acquisitions – Bain on how M&A success rates have shifted over twenty years, with a CEO who has done 24 acquisitions

👉 Harvard Business Review: How to Capitalize On the Coming M&A Wave – Nuno Fernandes on five common traps in M&A and the four questions to ask before any deal

👉 B Capital: The Buyer's Playbook — A Strategic Guide to M&A – the framework experienced acquirers use to evaluate targets, useful for understanding what the other side is looking at

👉 PMI Stack: 50+ Post-Merger Integration Statistics – A well-organized collection of integration success and failure rates from multiple studies

Coming up tomorrow

Tomorrow, we're covering why most productivity tools don't free real time, and the four-step order that does.

Have a great week!

P.S. If this is useful, send it to one founder you know who is thinking about selling.