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.

Laurel Touby, founder of Mediabistro.com, a community and job-listings site for media professionals, knew that she eventually wanted to sell her company since the day she founded it in 1996.

"I always made it a point to go to conferences in my industry, meet people, and get invited to speak at events," Touby says. She also took pains to learn about boutique banks that specialized in mergers and acquisitions and find out when they would have representatives at various conferences.

"Don't sign up with any of them, but be on their radar screen, because they'll start talking about you," Touby advises. "That will generate interest from potential acquirers."

Touby was eventually approached by a number of newspaper and magazine companies, as well as private equity groups. She turned down two firm offers before finally selling Mediabistro.com to Jupitermedia in 2007 for $23 million.

For tech companies, online communication is just as important as face-to-face encounters. Jaiku's Engeström traveled around the world giving talks about what he was doing, and he also blogged about his business. Salman Ullah, then Google's director of corporate development, told a Los Angeles venture group last year that while Google responded to every email pitching a company, phone calls garnered only a 10 percent response rate.

Shop Yourself Around.
If one suitor finds you attractive, chances are that others will too.

Postini, an email-security company founded in 1999, had developed a reputation for being particularly good at filtering spam. The company had also been profitable for many years and was continuing to grow.

"We had a number of companies try to acquire us," says Postini founder Scott Petry. He declines to be specific but says that the usual suspects in the antivirus-software business came courting.

"Their focus was too narrow, though. They looked at us as only a security application," Petry says, so he turned down their overtures. But in 2006, Google approached Postini about a potential partnership, not an acquisition.

"Google looked at us holistically as a platform company," Petry says. "They were the first that saw us for the potential that we were building." For nine months, the two companies enjoyed a fruitful partnership, with Postini making its products available to Google Applications customers.

Things were going so well for Postini, in fact, that it was drafting papers to go public. Instead, Google made an offer that Petry couldn't refuse. In 2007, he accepted Google's $625 million offer to buy the company.

Stay Focused.
Even though it's important to network and be aware of what potential acquirers are looking for, continuing to stay focused on operations and growth is still paramount.

"If you're running a company that others are interested in, then you have leverage because you're doing something that they can't," says Postini's Petry. "That's powerful, and as a potential acquiree, you should be thinking about how you can maintain that and scale that, post-acquisition. Make a good product, stay grounded, and satisfy your customers."

With that sage advice, you'll be well positioned no matter what happens.