With IPO windows still largely closed and valuations down from their 2021 highs, M&A activity has heated up across the startup landscape. Startups are being acquired. Startups are acquiring other startups. And private equity firms are circling, eager to scoop up companies at more favorable prices.
According to data from Crunchbase, Q1 2025 was the strongest quarter for global startup M&A since 2021, with reported exit values reaching $71 billion. In short, deals are happening, and they’re happening fast.
If you’re a startup founder who’s been approached by a potential acquirer, congratulations. You’ve built something valuable. But now it’s time to shift gears from building to negotiating. And that requires a different kind of focus, planning, and leadership.
What to Do When You’re Being Approached for an Acquisition
As someone who’s helped guide many companies through successful exits, I can tell you this: M&A is not a moment. It’s a marathon. A successful outcome depends on your ability to navigate a long, complex process with precision and realism.
“M&A is not a moment. It’s a marathon. A successful outcome depends on your ability to navigate a long, complex process with precision and realism.”
Here’s what to keep in mind…
1. Be Ready for the Long Haul
From the first conversation to the final signature, M&A deals often take months. You’ll be under sustained scrutiny, especially when it comes to your numbers. A casual data request today could turn into an intense due diligence process tomorrow. This is not the time to realize your financials are messy or that your systems can’t produce accurate reports.
One of the smartest moves you can make early on is to bring in experienced support. For example, a Quality of Earnings (QoE) review by an external CPA can go a long way in making due diligence smoother. And having a partner like Burkland involved helps ensure you’re presenting clean, defensible data from the start.
2. It’s All About Leverage
Your greatest source of leverage in an M&A negotiation is the perceived value of your company—its fit, its future, and its ability to create synergy with the acquirer. The more essential you seem to their vision, the more favorable your terms.
But beware: while optimism is an important part of being a founder, it can get you into trouble during negotiations. If you paint too rosy a picture or set unrealistic expectations, you hand the buyer a tool they’ll later use to claw back value, especially if they structure the deal with earnouts.
“…while optimism is an important part of being a founder, it can get you into trouble during negotiations.”
3. Understand Earnouts and Their Risks
Earnouts are deal structures where part of your compensation depends on future performance. They’re incredibly common in startup acquisitions, and potentially risky. Overpromise now, and you may find yourself fighting to hit goals that are just out of reach later.
A seasoned CFO can help you set realistic projections and negotiate earnout terms that make sense. Don’t let enthusiasm sabotage your future compensation.
4. It’s Not Just About the Check
Many founders are surprised to learn they won’t simply be walking away with a check after selling their company. In most acquisitions, the buyer wants you—and often your key team members—to stick around for at least 1–3 years. They’re not just buying your balance sheet or your IP; they’re buying your momentum.
So think ahead: Who on your team is essential to the future of your company under new ownership? Make that clear in early conversations. Fight to protect the people who’ve helped you build what’s valuable, and make sure they’re incentivized to stay.
5. Manage Internal Communication Carefully
Deals can fall apart due to internal missteps. The moment word leaks, people will start asking: What happens to me? Is my job safe? Are we merging with their team?
You need to decide who to bring into the tent—and when. For key team members, loop them in early and clearly communicate the vision. Keep morale steady and make sure the people you need most are on board with the direction of the deal. M&A involves more than numbers; it’s about bringing together people, priorities, values, and visions.
6. Prepare for Sophisticated Scrutiny
Most serious buyers—especially private equity firms and strategic acquirers—have corporate development teams who’ve done this many times before. They follow a rigorous, structured process. To meet them on equal footing, you’ll need to rise to their level. That means getting your house in order.
If you’re heading into M&A due diligence, these are some common pitfalls you can’t afford to ignore:
- Review your export control compliance – Ensure your products, software, and technologies comply with U.S. export regulations (such as EAR or ITAR), especially if they involve encryption, AI, or cross-border data transfer. Buyers will scrutinize this closely to avoid future regulatory exposure.
- Ensure your data privacy practices meet current regulatory standards – Buyers will expect clear documentation showing your compliance with data protection laws like GDPR, CCPA, and others. This includes user consent processes, data storage policies, and breach response plans—all of which will be examined in due diligence.
- Validate your tax compliance across all jurisdictions – That means more than just filing federal returns. You’ll need to show accurate reporting and payment of local and state taxes, sales and use taxes, and any foreign tax obligations if you have international operations or customers.
- Confirm employment and compliance status of remote and international team members – If your team includes contractors or employees in multiple states or countries, make sure you’ve registered in the proper jurisdictions, are withholding taxes correctly, and have the right legal agreements in place.
- Prepare clean, GAAP-compliant financial statements and documentation – Most acquirers will want to see accrual-based financials, with well-organized supporting documentation for revenue recognition, deferred costs, cap tables, and other key metrics. Anything unclear or inconsistent could raise red flags.
These are not “nice to haves”—they’re non-negotiables in a deal environment. Anything overlooked can reduce your valuation or derail the deal entirely.
Set Yourself Up for a Successful Exit
M&A shouldn’t just “happen” to you. It should be a deliberate, strategic move that you’ve prepared for in advance. When you’re prepared, you set the tone. You answer questions with confidence. You lead negotiations instead of reacting to them. And you hold on to more value.
Burkland helps startups navigate M&A from early preparation through deal close and beyond. We provide financial modeling, diligence support, data room preparation, and strategic advice that reflects the buyer’s perspective as well as yours. We know what buyers look for, and we know how to get you ready.
If you’re being approached—or just want to be ready when the time comes—reach out to our M&A Support team. We’re ready to help you make your next move your best one yet.
Learn more about Burkland’s M&A support services and contact us to get started.