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Getting beaten up in the acquisition – need your help
6 points by rockin_rolla 3450 days ago
Hello guys,

we really need your help here - we don't have access to the expertise we need, those folks simply ain't around here and the time is ticking:

- We were approached by a very decent company who got interested in some pretty smart people inside our team (small startup, product making decent revenue, good ideas to expand the product lines) - I know good meetings and bad meetings - when we presented the tech and the team and ideas to the very senior tech staff of the acquirer -> it was a really really good meeting... 5/5

From there it went downwards (again, we are techies, not smart M&A guys): the M&A team started approaching us individually, did not talk to the team as a whole, told everybody a different story from "we just want you, we don't need the IP, lets just bilaterally agree on a signing bonus and what you think the company is worth" to "we need the entire technology and IP and need to perform an extensive DD on the tech".

Right now, they position it as "let us interview everybody individually and then pay some extra money for the startup".

To me that sounds like "let us try to screw you over, by offering individual signing bonuses, thus getting your reservation price revealed and pay peanuts for the tech because we will force you to sell the shares in the company through the employment contracts". Is this normal behavior or am I paranoid? I mean, it is perfectly possible they really just want the team (but again, they really need the entire team) - but then they kind a insist on the technology as well and are very pushy on the DD...

How do we find out their real intentions? Is it just a hiring or do they actually also want the IP and simply try to screw us? We don’t need to sell.

Guys, help.

Is that normal behavior from their M&A team? Thanks!

Jan

2 comments

I've no M&A expertise nor do I have an MBA but I do know at least one friend from college who has been doing M&A for years now and I'll pass this on to him. But what I would say is that your gut is probably right. I would set some ground rules: they talk to the team as a whole or not. Have everyone sign NDAs and non competes so they can't poach one member and then copy your product.
Thanks!
I sent this post to some people in my linkedin network. Best of luck.

Have you a banker/lawyer you trust? That might help here.

Thanks! We have a good lawyer - but he certainly focus on legal aspects. M&A advice in this niche is really scarce... You barely hear about company acquisitions this "small" and how negotiations went. We had a M&A banker (through a friend) essentially give us the advice "make it intransparent, sell the whole package, don't let them go after you individually" - but getting advice and having the balls is two things... Plus: if half of the team is like "yeah, but maybe we can try interviewing and see what happens" you kind a lose the negotiation power after all :-/
From: https://justinkan.com/the-founders-guide-to-selling-your-com...

"When a sufficiently high-up decision maker decides he/she wants to buy your startup, he/she will attempt to meet with you constantly and put time pressure on you, so as to prevent you from shopping the deal and getting a better offer. The absence of this behavior indicates the other company is not serious about acquiring your business."

"Letting a potential acquirer interview your team is extremely distracting for them, and signals to the acquirer that you are willing to bend over."

Wow, great read thanks a lot! Actually I have been preaching the "as soon as we interview before we have a valuation it's over" - great to read that I was right ;-D Thanks! Made my day!