Geoff Bourgeois is co-founder and CEO at HubStor, with 20+ years in the tech sector specializing in enterprise SaaS solutions.

First come the innovative startups, soon followed by a wave of consolidation. That makes the technology acquisition market a frothy environment. The headlines fill with staggering numbers when deals close. Yet the industry has seen many acquisitions that don't work out or aren't as successful as they could have been. Experienced IT guys have seen how choppy an acquisition transition can be. They learn a software their company relies on is getting acquired and wonder if they should recommend leaving the platform.

Acquisition is a sensitive period. There are many variations of what a "successful acquisition" means. As an entrepreneur or CEO, there are steps you can take to make sure an acquisition of your company goes smoothly for all stakeholders, including customers.

Three Keys To Set Your Company Up For Smooth Due Diligence From Its Start

When you started the company, future acquisition may have been in mind, but it wasn't your focus. As a result, you may not have been thinking how your company would weather the rigorous due diligence process as an acquisition target. 

Here are three steps you can take now to make sure your company is organized and prepared.

1. You need an intellectual property (IP) strategy. For any tech company, its IP assets are its most valuable assets. It's why the company is attractive to a buyer. Your IP strategy must produce unambiguous lines of IP ownership. 

It's common for a startup to shoestring its birth with friends and family helping out. A good friend joins you on weekends to help build some code out. The friend is well-intentioned, and you appreciate the help, but during due diligence, the buyer wants to know exactly who helped build the IP. Is there a legal liability now to the friend who helped? Are they owed royalties or other compensation?

A clear IP strategy clarifies these ownership issues. It helps you avoid ambiguity that could scare buyers with the risk of future litigation. At the very least, you'll avoid the drain of having to sort out IP ownership issues during due diligence.

2. Keep clean records. Your company's clean records are a critical piece to executing your IP strategy. Have clean records for every contract, acquisition, hiring — everything that your company has done. Buyers want to know the long-term commitments and liabilities that they'll be buying if they buy your company. 

If your records aren't in order, this will be a major distraction during due diligence. Team members will literally have to start combing through old emails and searching everywhere for any evidence or copies of needed records, which means they are not spending that time delivering for customers.

3. Build a clean structure and strategy for source code control. Do you know where your source code is? What are your backup protocols? Do you have a controlled release structure that ensures all your customers have the save version of the product? Having a strategy and program to manage your source code is where your IP strategy and record keeping meet.

Unfortunately, young software companies often work without any meaningful governance controls of the company's source code. Developers pull various third-party OEM or open-source components without oversight or documentation. Different versions get released to different customers. 

Without proper source code control, your IP can become a nightmare. A strategic buyer wants to take your product from something small and scale it; a messy source control system is an obstacle to that goal. It means the acquiring company will have to invest significant resources and time before new developers can be agile with new releases.

Understand Buyer Motivations

Part of setting your company up for a successful acquisition is understanding why your company is attractive to a buyer. There are two main reasons.

• Some companies buy startups as a defensive measure. They see what you're doing in their space and they don't want to compete against you. So they'll buy you and put your work on a shelf. They'll plan a quick end-of-life for your product and transition your customers to their platform.

• Other companies are strategic buyers. They have a vision for how your company's work fits into their long-term strategic plans. You've built a valuable piece of technology that they want as a key part of their future. They may keep it as a stand-alone product or integrate it into their platform. 

Find out the road map from the buyer that shows how your customers can continue to use the product under the new company’s leadership. You must understand why a buyer wants your company and how it fits into the future plans. As soon as you can, get on the phone with customers and socialize the synergies and strategic roadmap. After HubStor was acquired by Veritas, we got on the phone with customers. We were able to share with them what was happening in the short term and how the HubStor platform they knew would be integrated into Veritas’ NetBackup product. This is critical to communicating clear expectations to customers and other stakeholders.

Give Your Company A Greater Chance Of Success

Acquisitions are complicated. Your part, as CEO, is to lay the groundwork that increases your chances of being part of a successful acquisition. Having clean recordkeeping, an IP strategy and source code control are three essential pieces. Understanding where you fit in the buyer's vision defines what everyone will consider a "success." 

For me, "successful acquisition" also meant that the acquisition worked for all our stakeholders: founders, employees, partners and customers. If that's you, then you also need to make sure your company is a strategic fit for the buyer. 

If it checks all the stakeholder boxes, then you are setting everyone up for a successful acquisition.

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