M&A Playbook

Three weeks in is exactly when integration plans collapse or solidify. The disengaged engineers are your most urgent signal.

30-60-90 Day Integration Framework:

Immediate (next 2 weeks) — Stabilize:

• Org chart clarity: publish reporting lines today. Ambiguity is the #1 reason acquired employees leave.
• Integration sponsor: assign one person from your leadership team as the integration owner. Their one job: make the acquired team feel informed and connected.
• 1:1 with every acquired employee this week — ask: "What's working? What's confusing? What do you need to be effective?"

The disengaged engineers: They are evaluating whether they made a mistake. The acquisition vesting cliff is probably 6-12 months out — they're calculating. Ask directly in 1:1s: "How are you feeling about the transition?" Then listen without defensiveness.

30 Days — Technical Integration Plan:

For Rails vs Node.js, choose one approach:

1. Strangler fig: keep their service running, route new features to Node.js over 12-18 months
2. Bounded service: their product remains a standalone service that communicates via API
3. Rewrite: only if product overlap is so high that maintaining two stacks is unsustainable

This decision should be made with their engineers, not imposed on them.

60-90 Days — Cultural Integration:

• Joint rituals: include acquired team in your all-hands, team offsites, retros
• Kill the "us vs. them" dynamic: mixed squads for at least one project by day 60

What was the primary retention structure in the deal — earnout, equity vest, or both?

The board is right to push on this, but most first-time acquirers confuse "we should do M&A" with "we should do an acquisition." Start with the decision framework before you evaluate any specific deal.

The build / buy / partner decision matrix

Run every capability gap through four filters:

The honest answer for most $20M ARR companies: you should buy less often than your board thinks and partner more often than you do.

When to acquire

Acquisition makes sense in four situations:

1. Capability gaps that would take 18+ months to build: If closing the gap through hiring and building would require a new team, 18+ months, and distraction from your core product, buying a working solution is rational — especially if the market isn't slowing down.

2. Market share consolidation: Buying a direct competitor with overlapping customers to accelerate NRR growth and reduce competitive pressure. At $20M ARR, this means looking at companies at $2-8M ARR in the same segment.

3. Acquihires: When the asset is the team, not the product. You're paying a structured price ($50-200K per engineer typically, embedded in deal structure) to hire a pre-formed team with proven execution history. The product is secondary or gets sunset.

4. Geographic entry: A target with an established customer base and GTM motion in a geography you want to enter — particularly relevant if you're eyeing an international expansion where local relationships matter.

When to build

Build when you'd be compromising your core architecture by integrating an acquisition. If the capability needs to be deeply embedded in your product — not a bolt-on — external code carries integration debt that can cost more than building from scratch. Also build when the market simply doesn't have a buyable solution, or when the available options have technical approaches incompatible with yours.

Building is also right when the capability is your primary competitive moat. Don't outsource differentiation.

When to partner

Partner when the value is distribution, not technology. If a vendor's API gives you 80% of the capability you need, and their customer success team can co-sell with you, partnership is a fraction of the cost and risk of acquisition. Also partner when integration depth is low — if the connection is a data feed or a single API endpoint, you don't need to own it.

The test: would a customer care whether you built it or licensed it? If no, partner.

Acquisition readiness checklist for a first-time acquirer

Before you look at any specific target, confirm you have:

• M&A counsel retained — a lawyer who specializes in SaaS/tech M&A, not your general corporate counsel
• Integration budget identified — typically 15-25% of deal value for the first year (people, systems, process)
• Dedicated integration resource — someone whose job is integration, not someone who also runs a product team
• Board alignment on acquisition thesis — not "acquisitions in general" but specifically: what gap are we filling, what does success look like in 18 months, what's our walk-away price?
• Clean data room readiness — if you're going to ask targets for their financials, you need to be prepared to share yours in reciprocal diligence

Without these, you'll get to LOI and stall.

What $20M ARR companies can realistically acquire

Tuck-in acquisitions: Targets at $1-5M ARR, typically priced at 3-6x ARR ($3-15M). At $20M ARR, you can self-fund a deal in this range or raise a small debt facility. These are the highest-probability, lowest-disruption acquisitions for a first-timer.

Acquihires: Teams of 5-15 engineers or specialists. Deal structure is usually 50-70% cash at close with 30-50% in equity vesting over 2-3 years. Total cost: $1-4M for a team of 8-10. The product is acquired but often sunset within 12 months.

Technology/IP acquisitions: You're buying a patent portfolio, codebase, or proprietary dataset — not customers or people. Useful when the technology is the moat and the company around it has failed or is distressed. Often lower price, higher integration complexity.

The LOI process

A Letter of Intent is a non-binding term sheet that establishes the deal framework before you do full diligence. Key components:

• Purchase price and structure: total consideration, how much is cash at close vs. earnout vs. equity
• Earnout terms (if applicable): what metrics trigger earnout payments, over what period, how measured
• Exclusivity period: typically 30-45 days for a small deal — during this window, the seller can't negotiate with other buyers, and you do full diligence
• Conditions to close: financing, regulatory approval (rarely an issue sub-$15M), key employee retention
• Target close date: for a $3-10M tuck-in, 45-75 days from signed LOI to close is realistic if both parties are motivated

The LOI is also your first negotiating signal. Coming in at 3.5x ARR when the seller expects 5x tells them your read on the business immediately. Price it based on your diligence, not their ask.

What's the specific capability gap you're trying to close? That will determine whether acquisition is even the right instrument here.