At the Web 2.0 Summit in San Francisco in October, Microsoft C.E.O. Steve Ballmer surprised attendees when he boldly predicted that his company would acquire 20 companies a year for the next five years, in deals that ranged from $50 million to $1 billion.

Microsoft isn't the only giant on the prowl for new purchases. Since its initial public offering in 2004, Google has announced more than 35 acquisitions, with many more to come. Yahoo, even while fending off a hostile takeover by Microsoft, has already made two purchases of its own this year.

Such shopping sprees aren't limited to the tech world, either. Companies like Coca Cola and Clorox routinely buy smaller companies in their industries.

The fact is, larger firms with lots of cash will always be on the lookout for smaller, faster-growing ones to buy. Bruce Phillips, a researcher at the National Federation of Independent Business, says that 5 to 8 percent of all small businesses are sold each year. And with approximately 27 million small businesses in the U.S., that means there are plenty of potential deals waiting to happen.

For entrepreneurs, the questions are: What are the best ways to make your company attractive to a larger company? And how do you negotiate the best deal when they come calling?

Here are some tips from those who have done it before.

Find a Niche.
Two-and-a-half years ago, Sheri Schmelzer was a stay-at-home mom in Boulder, Colorado, who often enlisted her three young children in arts and crafts projects. With rhinestones, clay, and glue, they fashioned decorative doodads and placed them in the holes of their Crocs, the colorful, plastic shoes that were starting to become popular worldwide.

Seeing how much their kids' friends liked them, Schmelzer and her husband Rich spotted a business opportunity and launched a company, Jibbitz, to sell the decorations in stores and online. Within a year, they had sold more than a million pieces.

Then Crocs came calling, and the Schmelzers sold their company to the shoemaker for $10 million. They did it by creating a product that no one had thought of before.

Know Your Customers.
When social-networking applications started to gain traction two years ago, a couple of young Finns decided to start a microblogging service called Jaiku. Users could connect with their friends and family by going online and typing in updates about where they were or what they were doing.

Jaiku wasn't the only company out there that stumbled on this basic idea; the most well-known is probably Twitter. But Jaiku had one thing going for it that its competitors didn't. The founders had previously worked at Nokia and made sure to prioritize developing software that could run on cell phones too.

"Google is really interested in mobile presence," says Jyri Engeström, one of Jaiku's co-founders. "From that perspective, we were a logical company for them to look at." Google bought Jaiku in December for an undisclosed amount.

Network, Network, Network.
Trying to make your company attractive to a potential acquirer means talking, schmoozing, and getting noticed.