

Ask HN: Things to consider in an acquisition - anon2this

(It was suggested I submit this again - thanks!)<p>Long story short - a large multinational has proposed purchasing my startup (me and my wife essentially with a couple of part time guys). We'll be lawyering up before signing anything. But I wonder if hackers here who have successfully been acquired can provide any down to earth advice? We'll have enough cash to do anything we want for the rest of our lives. We may or may not be pushed out of the company (its ok if we are given the size of the check!).
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grellas
For legal factors to consider in selling a small business, see
<http://www.grellas.com/faq_small_business_007.html> (you may find some of
this helpful even if yours is not a "small business" sale).

For more sophisticated deals, some random thoughts (from a lawyer who has
represented many hackers, not a hacker as such):

1\. Avoid earn-outs if at all possible - if you go with an earn-out, plan as
if all you will see will be what you get at the initial closing.

2\. No-shop clauses are fine but keep them short and make sure they can only
be extended by mutual consent.

3\. Talk with your law firm/CPA firm about tax and structural issues up front,
_before_ you do a term sheet. If you have a C-Corp with low-basis assets, an
asset sale will leave you with a potential double tax hit. A stock sale or
tax-free merger (A, B, or C type) is preferable in such situations but each
has limits and restrictions on it - understand the structural points up front,
it will help considerably in how you negotiate the deal.

Term sheets may be legally non-binding but, you can bet, they will shape your
deal all the way through to closing. Structure it right in the term sheet,
then, and you will not be haunted by inadvertent blunders up-front that
prejudice your deal throughout.

4\. Watch out for duplicity. Use NDAs and limit due diligence to protect
against a buyer's gaining a lot of info about your company and then using it
competitively against you after dropping the acquisition.

5\. In dealing with acquisition teams, make sure to do the primary negotiating
with the key decision-makers so as to avoid getting the "two step" shuffle.

6\. Try to limit trailing liabilities on the deal. Limit the size of hold-
backs. Keep the reps and warranties as narrow as you or your lawyers can
negotiate. Make sure they have a short-term expiration date (e.g., 1 year from
the date of closing).

I am sure others will have more significant practical points to make. Many
other items might be added to this list.

