Step 2: The 1+1=3 Framework—How to Craft a Synergy Story That Wins Over Strategic Acquirers
This is step 2 of a 6-step process I laid out in my post 6 Strategies for Startup Founders to Sell their Startup Smart.
Summary: Considering getting acquired? It’s not enough to be "a great company" or a “great product.” To win over strategic acquirers, you must craft a 1+1=3 story—a narrative proving how combining your company and the acquirer creates exponential value.
This newsletter will show you how to build that story and back it with a spreadsheet that acquirers can’t ignore.
What’s This About?
Acquirers don't buy products. They buy synergies.
You can’t rely on your product to "speak for itself." You must demonstrate how the acquirer will be better off with your company than without it.
That’s where the 1+1=3 story comes in. It’s a straightforward, powerful narrative that shows how the combination of your company and the acquirer results in something greater than the sum of its parts.
Charlie Munger's idea of niche ecosystems is applicable here: Businesses, like animals, thrive in specialized niches. Your startup’s 1+1=3 story should show how your niche fills a critical gap in the buyer’s ecosystem
But words alone won’t cut it. You need to back it up with numbers.
In this newsletter, I’ll show you how to:
Craft a compelling 1+1=3 story.
Build a spreadsheet model that quantifies the top-line impact of your story.
Avoid the big mistakes that can ruin trust with acquirers.
If you’ve ever wondered how to convince a potential acquirer that you’re a "must-have" rather than a "nice-to-have," this is your blueprint.
Why Your Story Needs to Be More Than "We Have a Great Product"
Let me tell you a hard truth: No acquirer cares that your product is “great.”
They care about what your product does for them. Does it open a new revenue stream? Reduce their churn rate? Help them close bigger deals? If you can’t clearly articulate these synergies, you’ll be seen as just another "bolt-on" acquisition—easily ignored or undervalued.
This is why the 1+1=3 story is so powerful. It’s not about you. It’s about what happens when you and the acquirer combine forces.
Here’s an example:
1 = Your company (a predictive testing AI tool)
1 = Acquirer (a DevOps enterprise software platform)
3 = Synergy (Your AI tool embedded in their platform increases customer retention, drives upsells, and creates stickier contracts)
The story is simple, but the value it creates is clear. This makes it easier for M&A teams, partner managers, and product leaders at the acquirer to "sell" your acquisition internally.
If you don’t tell this story, someone else will frame it in a way that misses the point of the combined power of both the companies.
How to Craft Your 1+1=3 Story
Start with the Buyer’s Gaps
Every acquirer has weaknesses or unmet goals. Your job is to identify them. Look at their product portfolio, customer base, and market position. Do they need a key feature? Are they losing deals to competitors who do have the capability you provide? This is where your 1+1=3 story begins.Position Your Company as the Solution
Your story shouldn’t be "we’re great." It should be “we complete you.” You’re not just an add-on. You’re a missing piece of their strategy.Create a Visual Narrative
Most founders talk too much and show too little. Use a "Before and After" visual slide in your pitch deck. Show the buyer what life looks like before acquiring you (with problems and gaps) and after (with exponential growth, cost savings, or new capabilities).Make It Quantifiable
Words are nice. Numbers are better. This is where the spreadsheet comes in.
How to Build a Spreadsheet That Makes Your 1+1=3 Story Undeniable
If you want to win over strategic acquirers, you need to show them real numbers, not vague promises.
The best way to do this is with a spreadsheet model that projects your product's impact on the buyer's top-line revenue. This is especially critical in today’s environment, where acquirers are under pressure to drive growth in a slowing economy.
Here’s how to create a 1+1=3 Synergy Model:
Understand the Buyer’s Sales Model
If you don’t know how the acquirer generates revenue, you can’t model the impact of your product. Build relationships with their product leaders, M&A team, and partner managers to learn how they sell. What’s their customer base? What’s their Average Revenue Per User (ARPU)? How do they price their products?Identify Key Levers of Synergy
Ask yourself:Will our product increase their customer retention (reduce churn)?
Can we help them cross-sell or upsell to existing customers?
Will we help them win new customers or close bigger deals?
Build the Model in a Simple, Transparent Spreadsheet
Create a spreadsheet with the following key sections:Base Case: Their existing revenue without your company.
Uplift Scenario: Their projected revenue after embedding your product.
Key Assumptions: Make your assumptions clear, simple, and defensible. For example:
Your product reduces customer churn by 2%.
Your product increases average deal size by 10%.
Your product helps them win 5% more deals.
Test It With the Acquirer
Make it a collaborative process. Run your model by the acquirer’s finance, product, or partner teams. Invite them to challenge your assumptions and revise them together. This does two things:It builds trust.
It makes them feel ownership of the model.
Don’t Inflate the Numbers
Nothing kills trust faster than inflated projections. Be pragmatic. The buyer will resent the deal if you sell a story that doesn’t come true post-acquisition. Worse, you risk being seen as dishonest. Be conservative, but clear.
Avoid These Costly Mistakes
Failing to Understand the Acquirer’s Sales Model
Without insight into how the acquirer sells, you’ll guess in your model—and they’ll know it.Inflating Synergy Projections
You'll lose credibility if you claim to increase their revenue by 50%. Stick with defensible, incremental growth assumptions.Keeping the Model a Secret
Don’t wait to “reveal” your model at the negotiation table. Bring the acquirer into the process and make it a collaborative tool.
Why This Approach Works
Acquirers aren’t buying your product. They’re buying their future.
You shift their perspective by crafting a 1+1=3 story and backing it with real numbers. Instead of seeing you as a "nice-to-have," they see you as a "must-have." This changes everything.
Here’s what it gives you:
Stronger Leverage: Your valuation increases because you’re not just another option but essential to their strategy.
Faster Deal Velocity: The deal moves faster when buyers can see the financial impact.
More Buyer Competition: If multiple buyers see the 1+1=3 potential, you create FOMO (fear of missing out) and spark a bidding war.
Key Takeaways
Craft a 1+1=3 Story: Show how you and the buyer together create exponential value.
Build a Synergy Model: Create a spreadsheet that quantifies your impact on the acquirer’s revenue.
Make It Collaborative: Involve the acquirer in building the model to build trust and alignment.
Be Honest and Pragmatic: Avoid inflated numbers—credibility is everything.
Want to stand out as a "must-buy" instead of a "nice-to-have"? Build your 1+1=3 story, back it with numbers, and make it undeniable.
If you found this useful, please share it with a founder who needs to hear it. Also, if you want help building your 1+1=3 story, send me a message.