In our previous interview with Jay Pullur, we talked about a few things that make an enterprise startup successful. In the second part of the series, we have his thoughts on Mergers & Acquisitions. Pullur is one of the few entrepreneurs who have built, bought and sold software products to & from global companies. Edited Excerpts.
How does a startup get into the radar of big companies scouting for acquisition?
Firstly, the product must match global expectations and compete with global players. If it were to ever get acquired, it has to be interesting for the buyer. Ideally, you should also have capabilities in India and the United States. One cant simply build a product and expect an Autodesk or VMWare to find me. One has to be visible there as well.
Small is Good
You need to get rid of some assumptions. For instance, you might think that a company might not acquire you because you are too small. But how do we know? I met the head of M&A at Oracle and asked him what kind of companies do you want to look at? I reluctantly suggested if they’d be looking for companies between $50-$100 mn. He said $100 mn won’t even add to anything. To generate $100 mn, they would have burned a lot of capital. Instead, it makes more sense to look at smaller companies ($4-5 mn) with proven technology. That’s how you need to understand the buyer.
Business Partnering Leads to Acquisition
Indian companies also need a lot of business partnering. Many times, acquisitions don’t happen when someone comes with a shopping bag. They partner with companies, go to the customer jointly. If it works and they get to know the company better, an acquisition might happen. In many companies, the corporate development team handles both business partnerships and acquisitions.
There could be external factors that we can’t do much about. For instance, companies might think that India is not a friendly country to do business with. This friction exits. Someone should be able to say that our product companies are genuine.
Next in the series: Pramati’s First Sale & Lessons on Selling to Enterprises