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I'm curious about this. Why the recap email was so important? What did it cover that the LOI didn't?

ttul 5y ago
Likely things like: 1. Founder gets a special washroom with a golden toilet seat. 2. Unlimited lattes at Philz, but only on Tuesdays.
mrDmrTmrJ 5y ago
Not the OP. Though I have been part of a sale process as a founder (with a reasonably complex deal structure) and have had friends sell companies in the past and different friends who are in ongoing acquisitions. Let me see if I can provide some details without violating any NDAs! To give a bit more color, the LOI usually is just the basic financial terms of the deal. It's an outline. But it usually *doesn't have space to cover many of the key details of what may make an acquisition "successful" for both parties. KEY NOTE: NONE of the ideas below are from any one deal. Rather, it's an 'off the head' list of things I've seen matter across multiple deals. 1. Organizationally: Guidance on independence, integration(?), reporting structure?, approval structure, IT arrangements, WFH or vacation policies. Do you integrate with the buyers payroll and HR systems? Often these details matter intensely to your employees quality of life. I've seen these details go "good" or go "bad" with predictable outcomes. E.g. Try taking telling a team that's used to getting paid via Gusto that they're now going to be onboarded to a legacy ADP payroll system - it's unfun :) 2. Various financial Deal terms: Deal bonuses?. Pay changes?. Are you resetting vesting and or new equity? How might that work? Were you underpaying your team as a 'startup employees' - if so how does that change? Level matching? 401k matches - big companies are usually better here. Also, what about key employees/leaders you need to retain either to the deal close or +18 months? Are they getting guaranteed severance for certain conditions? If so, what are those conditions? When deals get announced there can instantly be a lot of hurt/confused/angry people - so getting key ducks in a row before hand is essential. And trying to negotiate this after the fact will leave you constantly behind the "eight-ball" and with no leverage. Every deal I've seen has had some level of 'hurt feelings' by great people who felt valued and appreciated by the old org. now feel ignored and unimportant by the new org. The time to advocate for them is in this phase. 3. Team. Most members of the acquired team will leave within 2 years. I've heard figures by people who've done 100+ acquisitions that as high as 90% of employees will be gone. Obviously varies in every case. So how do you start planning for this natural turn over? How do you insure that the 'team' can stay strong even if the individuals change? Will the acquisition have the previous freedoms in hiring that allowed them to build a high velocity team in the first place? There's a gazillion more things. In general, the more clarity that exists at the beginning, the better. And there's no way the LOI can contain (or should contain) even a fraction of that. But you certainly want it agreed to in writing.

ttul 5y ago

Likely things like: 1. Founder gets a special washroom with a golden toilet seat. 2. Unlimited lattes at Philz, but only on Tuesdays.

mrDmrTmrJ 5y ago

Not the OP. Though I have been part of a sale process as a founder (with a reasonably complex deal structure) and have had friends sell companies in the past and different friends who are in ongoing acquisitions. Let me see if I can provide some details without violating any NDAs! To give a bit more color, the LOI usually is just the basic financial terms of the deal. It's an outline. But it usually *doesn't have space to cover many of the key details of what may make an acquisition "successful" for both parties. KEY NOTE: NONE of the ideas below are from any one deal. Rather, it's an 'off the head' list of things I've seen matter across multiple deals. 1. Organizationally: Guidance on independence, integration(?), reporting structure?, approval structure, IT arrangements, WFH or vacation policies. Do you integrate with the buyers payroll and HR systems? Often these details matter intensely to your employees quality of life. I've seen these details go "good" or go "bad" with predictable outcomes. E.g. Try taking telling a team that's used to getting paid via Gusto that they're now going to be onboarded to a legacy ADP payroll system - it's unfun :) 2. Various financial Deal terms: Deal bonuses?. Pay changes?. Are you resetting vesting and or new equity? How might that work? Were you underpaying your team as a 'startup employees' - if so how does that change? Level matching? 401k matches - big companies are usually better here. Also, what about key employees/leaders you need to retain either to the deal close or +18 months? Are they getting guaranteed severance for certain conditions? If so, what are those conditions? When deals get announced there can instantly be a lot of hurt/confused/angry people - so getting key ducks in a row before hand is essential. And trying to negotiate this after the fact will leave you constantly behind the "eight-ball" and with no leverage. Every deal I've seen has had some level of 'hurt feelings' by great people who felt valued and appreciated by the old org. now feel ignored and unimportant by the new org. The time to advocate for them is in this phase. 3. Team. Most members of the acquired team will leave within 2 years. I've heard figures by people who've done 100+ acquisitions that as high as 90% of employees will be gone. Obviously varies in every case. So how do you start planning for this natural turn over? How do you insure that the 'team' can stay strong even if the individuals change? Will the acquisition have the previous freedoms in hiring that allowed them to build a high velocity team in the first place? There's a gazillion more things. In general, the more clarity that exists at the beginning, the better. And there's no way the LOI can contain (or should contain) even a fraction of that. But you certainly want it agreed to in writing.