Man, do I have some latent resentment...
There's always a chance I'm being foolish or paranoid, but this approach is the safest.
Hey, that's $100 for free! Only it shows you don't really value them at zero. It's only a slightly smaller lie than founders who insist their startup is worth hundreds of millions.
The truth is somewhere betweem the two...
This makes it much more sensible to value them near zero.
Chances are the outgoing CEO or GMs compensation is tied directly to how many key personnel he can keep on, in order to maintain profitability.
After they (the deal team) brain drain the key personnel, they cut the dead weight, move any existing profitable parts of the business to an existing facility, and then shut it down before moving on to the next acquisition a week after that.
At least that wss my experience in biotech...
The moment they have a VP telling you everything is going to be great you need to start hedging your bets. Update your resume. Catch up with your contacts. And for the love of Pete, don’t make any major purchases.
I'm not so sure that there needs to be some sort of greater altruism at play here?
To put this into context. Facebook will likely hit ~$17 billion in profit for fiscal 2017. They have 20,000 employees. If their only obligation was to employees as owners, they could very safely distribute half a million dollars per year perpetually to every one of their employees (while distributing billions to the early shareholders). This model would have vastly outperformed the IPO model as far as the VC firms are concerned (specifically as far as their institutional capital suppliers are concerned). Most VC investment gets liquidated early on, shortly after the IPO (the same happened with Google, most of the early backers bailed not long after the IPO, or their returns to date would be comically higher; Peter Thiel made the same choice with his Facebook position, selling a lot of it early after the IPO).
But VCs make decisions with limited information, based on probabilities, and in this case going for an earlier payout via IPO or selling the company is a more rational option.
I actually worked at a company that had that, and we wound up with roughly a $5K bonus every year. Better than nothing, and actually more than I've made off of stock options, which is nothing. Actually it's negative, seeing I exercised some of them.
Not like I have much to draw on, but to me it seems that a huge acquisition is probably more bang for your buck than going public (which is by definition a gamble).
I don't think I'd ever want to be the CEO of a Fortune 500 company. Being at the whims of finicky investors on top of shady market forces 24/7 just seems awful when compared to getting acquired for a pretty penny (WhatsApp or Tumblr come to mind).
Whereas if your private company is bought out by another private company and a significant chunk of the compensation is in stock, the market is far less liquid.