3 ms·
> The buyers were nice enough to give us the precise reason for their drawback: - churn - business too dependant on us > About the second point, I was also sur
by IMTDb 5y ago
> The buyers were nice enough to give us the precise reason for their drawback:
- churn
- business too dependant on us
> About the second point, I was also surprised because we already talked about it a lot.
> And this is why we agreed to stay as long as 18 months to train a new team.
Wow, that sound so short. When acquiring a business for multiples of the ARR, you need long term success to break even. If the founding team wishes to leave ASAP after selling, barley giving enough time to find a train a replacement, I can understand that the buyer has cold feet. Especially if churn is a concern.
I wasn't in the discussion, but I bet you could have closed the deal, by negotiating (potentially bigger) earn outs on a longer period (3 to 5 years), showing confidence in the long term success of the company. But to me, 18 month sounds like a bare minimum where objective can be achieved by aggressively pushing the company potentially even hurting it on the long term.
- mchusma 5y agoRe: Earn out. 1. My understanding is the earn out was discussed upfront, so not a reason to back out of a LOI. 2. I've been through an acquisition (different circumstances). IMO 1 year is critical to a good transition and honestly, weird but fun. Year 2 the main integration stuff is done, and you should be out, so things start to get akward. Year 3 you probably shouldn't be involved, you want the business to be sustainable on its own. Situations vary, but I think all parties would be better off with a "1 year full time then 1 hour/week for another 2 years." 1 hour/week should be easy to give, even if you take another gig, and is enough time to help continuity.