How acquirers decide comes down to fit and timing. Strategic buyers such as SAP look for a company that fills a gap in their own portfolio when building or partnering would be too slow. Private equity firms track signals that a founder might sell and prefer buyers and sellers who have known each other for years.
How do strategic acquirers decide which company to buy?
A strategic acquirer, meaning a company that buys others to strengthen its own business, usually starts from its portfolio strategy. The first question is where the gaps in its own product range are.
Mani Pirouz is Head of Business Transformation Management at the German software company SAP. He was instrumental in SAP's acquisition strategy of more than €3 billion, with deals such as Signavio, LeanIX and WalkMe. In my CEO Briefing on how SAP decides who to acquire, he describes how every strategic acquisition at SAP starts with one question: where are the white spaces in our portfolio?
A white space is a segment where four things are true:
- The buyer knows the segment is becoming critical, for example process mining, enterprise architecture or change management.
- The buyer's own offering is not competitive or fast enough.
- Building the product internally would take too long.
- A partnership would not give enough integration or control.
When all four apply, buying becomes the answer.
When does a buyer choose to buy instead of build or partner?
When the timing makes the gap urgent and the other two options are too slow or too loose. At SAP, the strategic context decided it. Disruption cycles were accelerating with COVID, supply chain shocks and AI. Enterprises needed help to rebuild their business processes, beyond running them. SAP needed to grow from a pure software provider into a company that enables this change.
Each acquisition filled one part of that gap:
- Signavio became the modeling layer, where companies design their processes.
- LeanIX became the architecture layer.
- WalkMe became the user execution layer.
Together, the three companies covered an area that SAP could not cover on its own.
Why does an existing relationship with a buyer matter?
Because an existing relationship gives the buyer trust and context before the deal. SAP already had strong customer relationships with Signavio and LeanIX. The companies SAP bought were already customers or partners in sales.
LeanIX started working with SAP years before enterprise architecture became urgent. When the moment came, LeanIX was already embedded. If a strategic buyer uses your product, likes your API or sells together with you, that relationship can become the start of an acquisition.
How does private equity find and choose companies to buy?
Some private equity (PE) firms look for companies long before the founder thinks about selling. Christoph Jost is Founder and Managing Partner at Flex Capital, a PE firm that has bought twelve platform companies in DACH (Germany, Austria and Switzerland) and made twelve add-on acquisitions, meaning further companies bought to join them.
In my CEO Briefing on PE buyers, he describes his sourcing openly: cold calls, champagne bottles sent to congratulate founders on milestones, webinars, events, and a proprietary tool with six people running it full-time. The tool flags signals that a founder might be ready to sell:
- a change in managing director
- a founder reaching their late fifties
- revenue that has stayed flat for two years in a row
- no senior hire in eighteen months
The goal is a proprietary deal: a sale that the buyer negotiates with the founder alone, without a competitive auction. Christoph puts it this way: “The feeling of telling your counterpart: this is a proprietary deal and I’m only doing this with you – that is a very powerful lever for the founder”.
What makes a buyer confident enough to close?
Conviction built over time. A buyer who has known the company for months or years has done half of its checks informally and trusts what the founder says, because it has watched long enough to verify it.
Christoph offers founders who reach out early an honest view on fit. If the company is not a match for Flex, he names three or four firms that look for exactly that profile. The founder who came back two years after a first conversation is the one he already trusts. For him, that means less risk, a faster process and a higher probability of closing.
The trade-off is price. A competitive process will usually drive a higher valuation. A founder who values certainty and speed, and a buyer who understands the business, is often better served by one buyer.
How can you tell whether a buyer is serious?
A serious buyer brings external resources and shares information about itself. Peter Möllmann is a partner at PXR, a tech M&A (mergers and acquisitions) law firm in DACH. In my CEO Briefing on the Fishing Expedition, he describes buyers, often direct competitors, who start an acquisition process to get access to your information, without the intention to buy.
He names two early warning signs:
- Resources: a serious buyer brings external advisors, a dedicated deal team and real infrastructure for due diligence, the buyer's detailed check of your company. A competitor on a fishing expedition typically uses internal resources only.
- Information asymmetry: a real buyer accepts mutual transparency and shares integration plans, organizational structure and its strategic rationale. A fishing buyer only wants to receive.
When the buyer is a direct competitor, European competition law restricts which information can be exchanged at all, for example pricing, margins or revenue details. The common solution is a clean team: external advisors who review the sensitive data for the buyer and pass on only aggregated results. If a competitor-buyer does not propose this structure, that is a red flag.
How acquirers decide: what can founders do to fit what they look for?
- Map the company to strategic themes: position the product as the enabler of a shift that buyers care about.
- Watch when your space becomes critical: before it becomes crowded.
- Build partnerships that could become pipelines: as supplier, integration partner or co-seller of a likely buyer.
- Think in build, buy or partner: ask why the buyer would not build the product itself, and make buying the obvious call.
- Talk to two or three PE firms active in your space: to understand what they look for, without pitching.
- Test every competitor-buyer: ask for reciprocal disclosure early and be willing to stop the process if it stays one-sided.
“Acquirers don’t wait to be pitched. They scan the market for what fits their long-term narrative – and move when timing and trust align.”
Frequently asked questions
What is a white space in M&A?
A white space is a segment that is becoming critical for a buyer, where its own offering is not strong or fast enough. If building takes too long and a partnership gives too little control, buying a company becomes the answer.
Do strategic buyers and private equity look for the same things?
They start from different places. SAP starts from gaps in its own portfolio, while PE firms such as Flex Capital track signals that a founder might be ready to sell and value a long relationship before the deal.
What is a fishing expedition in M&A?
It is an acquisition process that a potential buyer, often a direct competitor, starts mainly to get access to your information. Two warning signs are a buyer who uses only internal resources and a buyer who will not share information about itself.
Can I share my numbers with a competitor who wants to buy my company?
Only within tight limits. European competition law restricts the exchange of pricing, margin and revenue details between competitors, so a clean team of external advisors often reviews that data on the buyer's behalf.
Do I need an advisor before I talk to acquirers?
A founder who enters buyer talks under time pressure and with no prior relationship negotiates from a weaker position. Building relationships with likely buyers early, and understanding the trade-off between one buyer and a competitive process, improves that position. See how my exit advisory works.
