A rocky market is not a bad time for priming an exit

When serial entrepreneur Mert Iseri exited the Chicago-based start-up SwipeSense in March 2020, the Covid-19 pandemic was just beginning to sweep across the globe.

The sale process had started less than a year earlier, in the summer of 2019, but the topic of when to sell the company had been a theme for far longer.

For all start-ups, there comes a moment when it makes sense to sell. Generally, the business is growing and hitting its targets but there are challenges ahead: whether in the form of new competitors, higher customer acquisition costs, a big technology leap that needs to happen. The question is whether to fund raise or sell?

Just such a moment occurred at SwipeSense in 2019. Mert and the board decided that the partnership with SC Johnson was the best way to continue growing their impact.

But having continually considered with the board and mentors where SwipeSense would make the best strategic fit helped the sale process. One of its applications increases hand hygiene compliance to lower hospital-acquired infections, leading to hospitals using more soap and hand sanitizer. That gave SC Johnson a strong strategic rationale for acquiring it.

Sitting down with likely acquirers to discuss strategic opportunities returns value in spades when you’re ready to sell.

“It was such a strong strategic alignment,” Mert notes. “When we made the decision to sell, all of these companies were already in our Rolodex and we had talked to our board about where strategic value was collaborative. That’s what kicked off the process. Things weren’t as smooth as I wanted them to be, but we ended up with a successful exit to SC Johnson, one of the largest companies that make soap and hand sanitizers in the US and the rest of the world.”

There’s never a bad time to test the waters with potential partners. Mert advises initially making contact where there is a good strategic fit to ask if they would like to collaborate to create value for both parties, believing that strategic partnerships naturally lead to acquisitions.

At SwipeSense, for instance, Mert had initially contacted a senior executive at one of the companies that expressed an interest in bidding some time before 2019 through Twitter, asking whether there was an opportunity to work together. Executive teams are open to conversations like this, he says.

Study strategic partnerships that might lead to your business being acquired. There’s never a bad time.

“The worst that’s going to happen is that they say, ‘Hey, no, actually that’s not going to work.’ The best is not only they’re going to become a future acquirer, they’re going to want to put a partnership in place to help realize that value sooner.”

Since the 2020 exit, Mert has founded another start-up, Gepeto that is creating an AI-powered sales rep. It’s early days, but for other start-ups that have reached the moment of exit, the current uncertainty does nothing to prevent them exploring the underlying strategic rationale of collaborating with potential acquirers.

Indeed, it might be possible to turn the current uncertainty into an eventual negotiating advantage. “You want to be that desirable company that’s just out of reach. They’re trying to get hold of you and you’re not ready to sell,” Mert concludes.

Gepeto is not affiliated with UBS.