A large food company wants to acquire a plant-based snack startup. Should it?

Before I answer, why do they want it? Is it for growth, for the brand, or to learn the category? And is there a price on the table? I'd answer it in three steps. The first is whether the startup is a good business on its own. That covers the market it's in and how it's doing. The thing I'd most want to know is whether people buy this brand again. The second is what it's worth to this buyer. There would be synergies. I'd size them, on both the revenue side and the cost side. The third is whether buying beats the alternatives. Those are building their own brand, licensing, or taking a minority stake first. I'd rank them on cost, speed and risk. I'd begin with the startup's numbers, since everything else depends on them. What do we have?

Before I answer, why do they want it? Is it for growth, for the brand, or to learn the category? And is there a price on the table? I'll assume the goal is growth while their own brands are flat, and the asking price is $200 million for a startup with $40 million in sales. I'd answer it in three steps. The first is whether the startup is a good business on its own. That covers the market it's in and how it's doing. I'd check whether plant-based snacks are still growing or have flattened after the early excitement. The thing I'd most want to know is whether people buy this brand again. Repeat purchase tells me more than sales growth, because a new snack can grow for a while on people trying it once. The second is what it's worth to this buyer. There would be synergies. I'd size them, on both the revenue side and the cost side. The big one is distribution. A large food company can put the product in maybe five times as many stores, and its scale should lower ingredient and manufacturing costs. Against that I'd count the risk that a big owner dulls the brand and the founders leave. The third is whether buying beats the alternatives. Those are building their own brand, licensing, or taking a minority stake first. I'd rank them on cost, speed and risk. Building takes years and big companies often struggle to create a credible challenger brand. A minority stake with an option to buy would limit the downside. At five times sales, my hypothesis is that the deal only pays if distribution can at least triple revenue. So I'd start with repeat rates and how many stores carry it today. Do we have those?