The M&A Process for Startups: Understanding Valuation and Planning Deals

Note: In this post, we summarize key takeaways from an episode of the torq.partners Finance Podcast. Bas Scheele, Managing Partner at torq.partners Benelux, shares insights from M&A and fundraising transactions and explains how M&A valuation, preparation, and negotiation work in today’s M&A process.

Why M&A Is Becoming More Relevant Again in the Current Market

The market environment following the boom years of 2020 and 2021 has become more challenging. Fundraising has become more difficult for many companies; investors are significantly more selective, and not every growth story can easily secure capital anymore. At the same time, strategic buyers and private equity funds still have capital on hand that they are looking to invest in compelling targets.

That is precisely why the M&A process is once again coming into sharper focus. For many startups and scaleups, a sale is no longer just a theoretical option, but a realistic strategic alternative. The market appears more demanding: Good deals are possible, but primarily for high-quality assets where a compelling company valuation aligns with a clear equity story.

How Strategic Buyers and Financial Investors Value Companies

Strategic buyers and financial investors view the same asset in different ways. A strategic buyer evaluates not only the company as a standalone business, but also the added value it can bring within its own group. This includes synergies, access to customers, faster product development, and additional revenue potential.

Financial investors view a company more as an investment in its own right. They ask how the business is evolving, what value it might have in a few years, and how an attractive exit can be achieved. It is precisely these factors that also play a central role in M&A valuation and startup valuation within the M&A process.

This also explains why, in certain cases, strategic buyers can pay higher prices than purely financial investors.

Why Fundraising Valuations and M&A Prices Often Differ

At first glance, fundraising and M&A appear similar, but they follow different logics. In a funding round, new capital flows into the company to finance growth. The valuation is therefore often based more on future potential, market size, and the assumption that significantly greater value can be created with fresh capital.

In an M&A transaction, on the other hand, the focus is usually on the sale of existing shares. Buyers examine more closely what is currently viable, what risks exist, and what the next steps in the company’s development might realistically look like. For this reason, a fundraising valuation often differs from the M&A valuation that can actually be achieved in the M&A process.

What Really Creates Value Today: Team, Market, Story, and Data Quality

There are several value drivers that consistently play a decisive role in transactions. The team is an essential part of this. Investors, in particular, look very closely at who is leading a company, how strong the founding team is, and whether it has already proven its ability to drive growth. The market is just as important: A compelling product alone is not enough if the target market is too small or not attractive enough.

Then there’s the equity story. Buyers and investors want to understand what problem the company is solving, why now is the right time, and how the strategy translates into robust metrics. Narratives alone are less effective than they used to be: what matters most is whether the vision and the numbers align seamlessly to enable a compelling M&A valuation and a realistic company valuation for a startup in the M&A process.

Another critical issue is data quality. A poorly structured data room, inconsistent reporting, or missing documents not only undermine the impression made but can also lead to concrete price discounts. Deal readiness is therefore always a finance issue as well. This is precisely where Transaction Services often come into play, ensuring that reporting, documentation, and financial logic are transaction-ready and professionally preparing for an M&A process.

Why Litigation Influences Pricing

A good deal isn't just the result of a good company—it also depends on a well-managed M&A process. Competition among multiple interested parties is a key factor in determining valuation and negotiating power. Setting up a structured, clearly timed M&A process creates better conditions for attracting attractive offers.

This also means that founders and CFOs need to understand early on that the process itself is part of value creation. Documentation, clear communication, well-defined timelines, and professional preparation make it easier for buyers to build trust. And trust has a direct impact on the pace, purchase price, and transaction security in the M&A process.

When Founders Should Reconsider Their Exit Strategy or Fundraising Efforts

The decision between fundraising and an exit is not just a market-driven one, but also a personal one. If it becomes apparent that your role will no longer align with the company’s development in the coming years, you shouldn’t wait to act until the pressure is already high.

After all, an M&A process takes time, and the signing or closing is often followed by a phase in which founders remain on board. Even if fundraising stalls, the next round isn’t always the best solution. In some cases, it makes more sense to pause the process, strengthen the company’s operations, and return to an M&A process later with better traction or a different strategic option.

What Is Often Underestimated in Negotiations

Transactions are rarely purely rational. Emotions play a major role, especially in founder-led processes—for example, when buyers push for price reductions after due diligence or when trust is lost during the M&A process.

A good advisor therefore not only helps with modeling and documentation, but also with assessing such situations. Some issues are tactical; others are substantive. The task is to keep a clear head, clearly separate interests, and keep negotiations in the M&A process constructive, even when the pressure is high.

What Founders and CFOs Should Consider When Choosing an M&A Advisor

Not every advisor is a good fit for every company. In addition to track record and industry experience, what matters most is how the collaboration feels. An M&A process is intense, requires quick coordination, and demands a great deal of trust. That’s why it’s not just professional expertise that counts, but also personal chemistry.

At the same time, specialization helps. Those who regularly work with technology companies and have a strong network of buyers and investors can structure M&A processes in a more targeted way and identify better prospects. For startups and scaleups, this often makes a significant difference.

Here's how torq.partners provides support

torq.partners supports startups and scaleups in transactions and in preparing for them—from deal readiness and financial storytelling to structured implementation throughout the process. This includes transaction services and mergers and acquisitions, as well as interim CFO support to ensure that reporting, the data room, and decision-making capabilities are in a state that can withstand the pressures of due diligence.