

What Every Founder Should Know When an Acquirer Comes Calling - coloneltcb
http://exitround.com/what-every-founder-should-know-when-an-acquirer-comes-calling-acquisition-exit/?utm_content=buffer2bb78&utm_source=buffer&utm_medium=twitter&utm_campaign=Buffer

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tptacek
My bet: the most important bit of advice you could give any startup about
managing acquisition offers is: _assume the offer is going to fall through_.
Funding negotiations are something many startups have a lot of experience
with, and they're notorious for unraveling late in the game. Acquisition talks
are much worse: they take longer and are more likely to fall apart.

An acquisition negotiation that dies late in the game is especially
demoralizing. When you're getting a company funded, you're talking to lots of
different investors, and may even have multiple paths to fund the company
(institutional VC, a convertible debt round, &c). But failing to close an
acquisition feels more like a verdict about the company and its prospects. For
one thing, you have fewer potential acquirers than investors. For another, to
get even a little bit engaged in an acquisition talk, you have to get yourself
in the mindset of a near-future exit.

Things to watch out for:

* The (usually inadvertent) management shift from sales to "business development", where you start bouncing around the industry talking to different people about acquisitions

* Acquirer optionality --- the article correctly points out that the acquiring _firm_ isn't necessarily prioritizing lower valuation about all else, but remember that deals are usually instigated and closed by specific _people_ in the firm, whose careers are most definitely going to be evaluated by the perceived success of the purchase --- long story short, the bizdev guy at your potential acquirer is likely to keep you on the hook longer than you'll be comfortable.

* Infecting your team. I'm actually not sure it's all that standard for acquirers to do rolling team interviews. I've been a part of a couple (and a party to a couple more) now and haven't been formally interviewed despite very senior roles. I'd be wary of letting an acquirer "interview" anyone on my team before I was reasonable sure the deal will close.

The other thing to know about acquisitions is that they are _fucking
expensive_. If you haven't done one, you probably have no idea. You are going
to get very, very friendly with corporate attorneys, and if you've got counsel
now reviewing sales contracts and whatnot, be aware that the attorneys that
manage your warrants and reps and stuff are way way more expensive than those
contract review people are.

The good news about legal expense and team risk is that they can be used as
deal qualifiers: if an acquirer balks about committing to something before
interviewing the team, or about legal costs, the deal might not be there. If
it isn't, it's important that you know that!

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hornbaker
Absolutely spot-on. ALWAYS assume it's going to fall through, and put your
BUSINESS first, not the discussions. As long as you keep the business growing,
the acquirer will not walk away (assuming they're serious in the first place).

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dkural
I strongly disagree with some of this advice. No detailed term sheet, no
access. No one gets to interview team members before "It’s at this point the
buyer should come to you with a pretty cut-and-dried view of exactly how
they’re looking at the transaction."

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luxpir
Perhaps ridiculous to even consider this at the early stage we're at, but that
was full of useful information to bear in mind to avoid missing an
opportunity.

Particularly appreciate being made aware of the preparation that can be done
in advance.

