Forbes 23 May 2013
Let me take a stab at some perhaps less obvious things to know about M&A (from the perspective of a start-up founder at least):
Companies don’t buy start-ups. People do — CEOs and SVPs. There are 1,000 companies Google GOOG -1.24% or Apple AAPL +1.15% or Salesforce or Facebook FB -2.97% or Oracle ORCL -0.23% or whomever could buy, that all could make strategic sense. But that’s not how M&A happens. It’s when a CEO sees a strategic gap in the future, or a VP sees a gap in what he/she can get done in the next 12-18 months — and fills that gap to with a deal, right or wrong.
VC multiples drive deal prices. Many deals are sort of valued off financial metrics and comps, but the actual price is often based on what would “clear” the VCs — maybe 2x for the late-stage VCs (see Instagram, Yammer, etc. acquired at 2x last round price), or 3-4x mid-stage VCs. Corporate M&A departments and others are OK with this because it’s a process and this is what it takes to “clear” seemingly good deals.

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