5 ms·

Mechanics of a Small Acquisition

153 points by jhchen 14y ago

therealarmen 14y ago
Believing that the finish line is just yards away and finding that it is actually miles is not going to be good for your company’s morale. I've learned this lesson the hard way. It's easy to get caught up in acquisition discussions, so be careful not to get ahead of youself. The cost for the acquirer to engage is much less. They are larger and sometimes have full-time staff devoted to M&A, while your startup's bandwidth is very limited.
- wangarific 14y ago
  It's also difficult to avoid getting so excited and consumed by the process that you lose focus on what your business is actually doing. The acquirer is sending their deal team but you won't have one working for you (even if you get a banker/broker, it still takes up a lot of the founders' time), so someone still needs to mind the store.
ActVen 14y ago
This is very reflective of the acquisition process my company went through when it was acquired(Priced at $13 million). However, one area that can't be emphasized enough is the distraction, time, and mental capital that this process entails. If you are not careful, it can hurt your business and its trajectory. Luckily, we had good people running the business for the founders while we concentrated on the acquisition process. One area not addressed very closely in this article is the difficulty of not sharing the possible acquisition with employees as you go through the process of gathering all of the due diligence data and having all of the meetings. Of course, keeping the acquisition process a secret from your employees isn't always required...but in our case it was. That added to the stress of the due diligence process for us.
maxpalm 14y ago
There's little public information about small acquisitions and how they happen -- thanks for sharing. Everyone would be better off if there more information and transparency around these processes.
- wangarific 14y ago
  I went through a small acquisition (single digit millions) and we're building a membership site that would help people understand this process (from the seller's perspective) and the potential pitfalls, what sorts of things do you think must be addressed? Or perhaps need greater attention?
  - maxpalm 14y ago
    What are the things that drive price? What does the diligence process look like? Managing telling employees vs secrecy?
    - camz 14y ago
      I've written an ebook about the due diligence process and I could write a post that explains it if enough ppl are interested
      - ringoboo 14y ago
        Yes please
        basilpeters 14y ago
        Me too. Thanks.
  - dchuk 14y ago
    Do you have a mailing list of anything else I can sign up to to be notified when this launches?
- gyardley 14y ago
  I thought Basil Peters' Early Exits (www.early-exits.com) was a pretty decent overview.
  - basilpeters 14y ago
sovande 14y ago
Interesting read, but for my part, I'm much more interested to learn _how_ to start the process. That is, tips on how to position your company to make it a candidate for acquisition. (Apart from a great product and name of course - got that). Ways to flag potential suitors? And ways to make it clear that you are looking for buyers? etc. Any pointers or text to look at would be much appreciated.
- king_magic 14y ago
  Ditto. I'd like to know if it is a process that really only starts once someone has noticed you, or if it is something an owner can push for. If so, what is the best way to do this? Right now, my strategy is to pursue integration and use it as an avenue to acquisition. Not sure if it's the most viable method, though.
  - ScottBurson 14y ago
    It's as with any negotiation: whoever needs the deal the worst is in the weaker position. There is such a thing as shopping a company around looking for an acquirer, but you're unlikely to get as good a deal as if they come to you.
- bigsassy 14y ago
  Ok. Here you go. http://maplebutter.com/getting-your-startup-ready-for-an-acquisition/ http://maplebutter.com/getting-your-startup-ready-for-an-acq...
- dirtyaura 14y ago
  I've been through one acquisition. The acquirer came to us, without us really realizing their plans at the time of the first contact. Around the same time, we were also contacted by a few other parties. What I've heard from other people, this seems to be the norm at least in consumer internet space. It's rare acquisition in which the acquirer hasn't followed your company for some time. So you are likely to have a better success if you get into radars of potential acquirers by suggesting biz dev deals first instead of direct acquisition proposal.
- 14y ago
danielweber 14y ago
I knew of one company that was, despite wanting to be acquired, made it as hard as possible. Someone showed up with the "accept no other offers for 90 days" and the company freaked out that they were being pressured. All discussion ground to a halt after that.
orangethirty 14y ago
Off-topic: I love the design of their page. The logo is just very attractive to me. It has a sort of mechanical-organic look to it. Great visuals.
pronoiac 14y ago
Has anyone collected advice for after the acquisition? I'm thinking things like: * Give yourself six months or so after joining before finalizing plans to sunset your original systems. It gives you time to work out the lay of the land re: political and software integration. * If you expect more manpower in development or maintenance, get it down in writing. Thoughts?
bilbobaggie 14y ago
TechCrunch basically paraphrased this article (http://techcrunch.com/2012/07/31/the-mechanics-of-a-small-acquisition-how-one-startup-navigated-a-multi-million-dollar-exit/ http://techcrunch.com/2012/07/31/the-mechanics-of-a-small-ac...). It's nice that Stypi is getting more press, but is it weird that TechCrunch kept the same format and only mildly changed the wording of the original post?

153 points by jhchen 14y ago

Believing that the finish line is just yards away and finding that it is actually miles is not going to be good for your company’s morale. I've learned this lesson the hard way. It's easy to get caught up in acquisition discussions, so be careful not to get ahead of youself. The cost for the acquirer to engage is much less. They are larger and sometimes have full-time staff devoted to M&A, while your startup's bandwidth is very limited.

wangarific 14y ago
It's also difficult to avoid getting so excited and consumed by the process that you lose focus on what your business is actually doing. The acquirer is sending their deal team but you won't have one working for you (even if you get a banker/broker, it still takes up a lot of the founders' time), so someone still needs to mind the store.

ActVen 14y ago

This is very reflective of the acquisition process my company went through when it was acquired(Priced at $13 million). However, one area that can't be emphasized enough is the distraction, time, and mental capital that this process entails. If you are not careful, it can hurt your business and its trajectory. Luckily, we had good people running the business for the founders while we concentrated on the acquisition process. One area not addressed very closely in this article is the difficulty of not sharing the possible acquisition with employees as you go through the process of gathering all of the due diligence data and having all of the meetings. Of course, keeping the acquisition process a secret from your employees isn't always required...but in our case it was. That added to the stress of the due diligence process for us.

maxpalm 14y ago

There's little public information about small acquisitions and how they happen -- thanks for sharing. Everyone would be better off if there more information and transparency around these processes.

wangarific 14y ago
I went through a small acquisition (single digit millions) and we're building a membership site that would help people understand this process (from the seller's perspective) and the potential pitfalls, what sorts of things do you think must be addressed? Or perhaps need greater attention?
- maxpalm 14y ago
  What are the things that drive price? What does the diligence process look like? Managing telling employees vs secrecy?
  - camz 14y ago
    I've written an ebook about the due diligence process and I could write a post that explains it if enough ppl are interested
    - ringoboo 14y ago
      Yes please
      - basilpeters 14y ago
        Me too. Thanks.
- dchuk 14y ago
  Do you have a mailing list of anything else I can sign up to to be notified when this launches?
gyardley 14y ago
I thought Basil Peters' Early Exits (www.early-exits.com) was a pretty decent overview.
- basilpeters 14y ago

sovande 14y ago

Interesting read, but for my part, I'm much more interested to learn _how_ to start the process. That is, tips on how to position your company to make it a candidate for acquisition. (Apart from a great product and name of course - got that). Ways to flag potential suitors? And ways to make it clear that you are looking for buyers? etc. Any pointers or text to look at would be much appreciated.

king_magic 14y ago
Ditto. I'd like to know if it is a process that really only starts once someone has noticed you, or if it is something an owner can push for. If so, what is the best way to do this? Right now, my strategy is to pursue integration and use it as an avenue to acquisition. Not sure if it's the most viable method, though.
- ScottBurson 14y ago
  It's as with any negotiation: whoever needs the deal the worst is in the weaker position. There is such a thing as shopping a company around looking for an acquirer, but you're unlikely to get as good a deal as if they come to you.
bigsassy 14y ago
Ok. Here you go. http://maplebutter.com/getting-your-startup-ready-for-an-acquisition/ http://maplebutter.com/getting-your-startup-ready-for-an-acq...
dirtyaura 14y ago
I've been through one acquisition. The acquirer came to us, without us really realizing their plans at the time of the first contact. Around the same time, we were also contacted by a few other parties. What I've heard from other people, this seems to be the norm at least in consumer internet space. It's rare acquisition in which the acquirer hasn't followed your company for some time. So you are likely to have a better success if you get into radars of potential acquirers by suggesting biz dev deals first instead of direct acquisition proposal.
14y ago

danielweber 14y ago

I knew of one company that was, despite wanting to be acquired, made it as hard as possible. Someone showed up with the "accept no other offers for 90 days" and the company freaked out that they were being pressured. All discussion ground to a halt after that.

orangethirty 14y ago

Off-topic: I love the design of their page. The logo is just very attractive to me. It has a sort of mechanical-organic look to it. Great visuals.

pronoiac 14y ago

Has anyone collected advice for after the acquisition? I'm thinking things like: * Give yourself six months or so after joining before finalizing plans to sunset your original systems. It gives you time to work out the lay of the land re: political and software integration. * If you expect more manpower in development or maintenance, get it down in writing. Thoughts?

bilbobaggie 14y ago

TechCrunch basically paraphrased this article (http://techcrunch.com/2012/07/31/the-mechanics-of-a-small-acquisition-how-one-startup-navigated-a-multi-million-dollar-exit/ http://techcrunch.com/2012/07/31/the-mechanics-of-a-small-ac...). It's nice that Stypi is getting more press, but is it weird that TechCrunch kept the same format and only mildly changed the wording of the original post?