

Ask HN: my startup got acquisition interest, what's next? - anonymous_dude

Recently, my startup got acquisition interest from another large company. Did a long telephonic conversation on our vision, product, etc. and it seems they are interested in taking this to next step. They've asked for our revenue and other metrics.<p>Now my question:<p>a) Should I ask them to sign NDA?<p>b) Should I insist on a ball park figure first before revealing key information? (They vaugely know the number of customers we have and general product price point)<p>I had casually asked for a ball park figure on phone but they said they would first need to meet us face-to-face to see if it is a strong fit.
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a5seo
I sold a 100% bootstrapped site in the low 8 figures recently. Here's my
advice: hire a lawyer with many many acquisitions under her belt. Don't hire a
banker unless they've sold companies to the other strategic buyers in your
space. Get another buyer interested asap (I had good luck doing this via
Linkedin). Nothing will motivate the best price and closing like a competitor
in the wings. You'd be surprised how many deals fall thru during due
diligence, so keep your head... The deal isn't done till you get the wire
transfer. Don't take an offer unless you would be truly happy with just the
cash. Earnouts and stock are very very risky and not dependent on your
actions. Don't reveal anything that could hurt you until they give a term
sheet and you "go exclusive" AND I strongly encourage you to have a break up
fee. You can tell them revenue and user data before you sign a term sheet, but
I'd be careful about naming customers or revealing how your technology works
until there is a penalty for them walking away, leaving you with lawyer bills.

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ericHosick
Here is how my first acquisition interest played out:

VC: "We want to buy your company". Me: "Umm. Okay. But, I am still
developing". VC:"No worries. Come down". I do (plane flight). Show up in this
big office. They make me wait in a huge room at a table that could seat 20.
One guy walks in with a thick printout, throws it on the table so the printout
slides to me and says "This is how we value a company. Read it." I read it and
the value of my company would be based solely on revenue.

What I learned: Don't let them put you in the defensive position. If there is
a strong fit then revenue and metrics shouldn't play much of a role (at least
initially). If you are taking the time to meet them face-to-face then I don't
think it is too much to ask for a ball park figure.

Hope this helps.

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anonymous_dude
Interesting. Thanks for talking about your experience.

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johnrob
This is an easy one - ask your lawyer. If you don't have one, now is the time
to get one. Choose a firm that has a reputation for startups.

Startup lawyers know everything about acquisitions. They see them first hand
from a unique vantage point: CEOs tell them stuff they won't tell investors,
and vice versa. They are the only people that know the whole picture.

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anonymous_dude
Actually, we are not based out of valley/US and finding the right kind of
lawyer in our region for such a situation may be hard.

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boucher
You don't need to be based in the US to hire an attorney in the US. No one in
my company has ever met our lawyer in person, and he did quite a bit of work
for us.

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lancewiggs
Keep talking, but don't let them distract you from the main work of building
the business.

If you really want to have an exit then you need others involved as well -
other buyers and smart experienced people to help with valuation and legals.

DEcide what you are worth - and use gut feel (your number) and someone that
can give you a quick and dirty valuation. If you actually have revenue or even
profit then this stuff is easier, but mainly it's doe by comparing you to
other deals.

Reach out to other likely buyers and let them know that these guys (named or
not) are sniffing around. The code words used by big companies are that your
are 'in play' and you want to court the decent buyers before creating an
auction situation.

Control the process yourself once you have the buyers lines up. Give them
consistent information, deadlines for tabled offers and then start playing
them off against each other. YOu'll get a great understanding of how they
operate and can choose the company with the best money AND fit.

Before you share anything too private then do make them sign an NDA - you
should have a stock one, and the negotiation process to get them to sign will
be a good telltale.

Oh- and the unsolicited offerer should always come to see you - at least at
first. No acquirer is too important to come to see you.

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scottkrager
If we are talking anything 7-figures or above...find an investment
bank/broker.

Sure you'll end up paying them a hefty cut...but you won't get screwed.

Plus, if you're getting interest from one large company, there are probably
others interested as well and a good broker can run an auction for you to get
a much better deal than trying to do it alone.

Selling your company isn't something you should do by yourself in my
experience.

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alexsherrick
From my experience, investment bankers don't really know much of anything. I
would shy away from this.

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scottkrager
Bad experience? Well, if you find the right IB, it can make all the
difference. (from my experience)

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brudgers
First question is, Do you want to sell?

If not drop, then drop the distraction and get back to work.

If maybe, decide if you really want to go work for the big company and if so,
hire a pit bull to work out the deal on your behalf, then get back to coding
in case it does not go through.

Flirting can lead to marriage, but it can also lead to a case of the clap. If
your product is strong, there are "plenty of fish" as they say.

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ksowocki
this basically explains it all (from TS founder, David Cohen):

[http://www.davidgcohen.com/2010/06/18/you-have-
acquisition-i...](http://www.davidgcohen.com/2010/06/18/you-have-acquisition-
interest-now-what/)

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anonymous_dude
Yep, I read it. In fact, David absolutely insists on getting a ball park
figure first. That's what I wanted to get advice on from HN.

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neworbit
If you have someone on your advisory board who has been through this before,
even in an unrelated space, spend quite a while talking to them. Possibly
offer them a slice to come in and help you get this done at good terms.

If you don't, consider finding someone as a last minute advisory board member
explicitly for this purpose.

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iamchmod
Get an outsider who can give you concrete unbiased advice on your process. An
attorney is ok, but generally an investment banker who specializes in your
size company is best. See the threads listed in previous comment.

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naithemilkman
Nothing like competitive tension between 2 or more acquirers to drive up the
valuation. So let the current acquirer's competitors know that you have an
offer from XYZ.

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kno
Get a Lawyer!!!!

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jsavimbi
a) No, NDA's may hurt you in the sales process, as it binds you both. The only
thing you need to protect is your IP which can be done through patenting if
you want to go that way, but basically it's the execution they should be
interested in, not the underlying tech. However, when it comes to facts and
figures, you should talk that over with your business lawyer as whatever you
represent may become binding.

b) No. Never tell a car salesman what you're willing to pay for a car. That
becomes the starting point from which he'll only go up. In your case, the
reverse. I'd hire an independent auditor to valuate your business, giving you
a high, low and median selling point from where you can intelligently
negotiate.

Your diligence needs to be done as to whether or not they're actually a good
fit to buy (qualified?) and research them to see if it looks like they may be
interested in your company from more than just a buying perspective, because
they could just be shopping you and there's no need to disclose everything.

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anonymous_dude
So you are recommending not to reveal revenues right now and instead tell them
what auditor says the company is worth?

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jsavimbi
I'm recommending that you be open and honest with your revenues as they fall
into the context of a potential sale. Once you've been able to pull all of the
information together (year over year revenues, adoption rates as compared to
the total market, etc.) together and undergo an audit for the true value of
the business, you'll be in a better position to negotiate a sale to one or
more parties.

If your suitor doesn't come right out with a great offer and their own NDA
accompanying it, which should go hand in hand, I wouldn't recommend entering
any type of secrecy agreement with them and open up a potential sale to other
suitors, if they do exist. If this big company you speak of will not prove to
you that they're serious at the outset, it's probably just a cursory fishing
expedition to begin to assess the market and you'd just be a starting point,
so yes, I'd keep my pants on until you know they're serious. After all,
they're approaching you. Let them do the talking for awhile.

But the best piece of advice which is echoing in the thread is to lawyer-up
asap, and don't go buying that new piece of shiny consumerism just yet.

