Disclaimer: I’m a tech/CTO guy and not a strategist, CEO, or marketeer. Also the stories below are not accurate. Still they feel useful to share 🙂
When you like to party, know when to stop
We started our company during University, and were no strangers to partying late (and waking up early to study). During the first years, we would continue to party all night with potential customers at events. This worked out great. Not only did we get long term friendships, we also signed up many “party friends” eventually as client. This seemed like a great strategy! A few years later, as we were more established as a company, 3 (!) representatives of large potential customers we had been chasing told us they really liked us and enjoyed the parties, however we partied too hard for their companies to be comfortable working with us. Wow, I never realized that! And to be fair, perhaps we were getting a bit too old to party so much. Also the evenings were more about hanging out with old friends than meeting new ones .. So we immediately dropped the “partying late” act, and only 1 event later started to sign larger clients.
Be prepared if you consider to be acquired
We had an acquisition offer during our early stages which seemed really good. We got along with the potential buyer, lots of synergies, serious company, etcetera. We flew over, had an amazing dinner, all looked great and we were excited since it would give a huge boost to the business. On our return, we received a list of 100+ questions. They didn’t seem too unreasonable or impossible to answer. However, as we found out, it was incredibly time consuming to collect all data to answer. Lots of information wasn’t digital yet or would reside at third parties.
As there was also a company to run, only nights were available to work on this. The result .. crazy hours of work and a potential buyer that is somehow finding reasons as time passes to make the deal more complex or less favorable than initially presented. And to be fair, once you start digging deep in all (paper) history you start wondering yourself if the buyer is getting a good deal.
When all questions were answered and negotiations were done, the final deal on paper was suddenly very different from the initial offer. At some point though, you feel you’d sign anything to never have to go through this (potentially life changing) process again. And that’s EXACTLY what acquiring companies try to achieve 🙂
On signing day .. we didn’t sign. We realized the final contract didn’t match the offer that got us excited in the first place. We considered all work done sunk costs, and figured from that moment on we would record ALL information digitally and structured to be immediately available whenever needed. This proved very useful for regular business as well when e.g. opening bank accounts or foreign subsidiaries. So it was a lesson well learned.
Take the lead
After this lesson well learned, years passed without the intent to sell. Until unexpectedly we received another takeover offer that would provide strong synergies. This time, we were prepared.
First thing we did, was to ensure we would be able to easily end negotiations AT ANY TIME during the conversations. All confidential information (such as customer or employee details) was anonymized until after signing. We did not invest in any M&A expert, since we figured they make the process more complex and we figured we could keep emotionally distanced enough ourselves this time. We did hire a good M&A lawyer when things got more serious, to simply check the legal texts and judge which clauses are “normal”. We setup our own data room to stay in control.
When we received the (now expected) 100+ questions, instead of taking the 3 weeks to collect the answers we sent the full (anonymized) documentation 3 days later. To answer the questions we simply referred to the relevant documents included. Now instead of us being flooded with work, they were flooded. We received a few more questions lists and either could refer to already provided documents, or spend some time to fill the gaps. Things were quite effortless on our end, and the other side was struggling. So we managed to revert the “trick”, and actually didn’t get “sucked in” the takeover process ourselves at all. Whenever they were trying to move away from the original proposal (sometimes with good reason), we’d kindly decline and indicated we’d rather continue our business (which was true).
We ended up with a fair deal for the employees, customers, and business guaranteeing continuity. As was set out from the start. More importantly, we controlled the process and didn’t get distracted from running the business. Until the night before signing, we considered not to sign. We lost little time / money, so at that day we still had a choice.
“I am a very cheap lawyer”
After closing, there are always some costs they need to be covered by the seller such as M&A and layer costs. The buyer had ~20 lawyers and a M&A team working on the deal. We had no M&A team and just 1 lawyer. During a phone call they asked where they could find our M&A costs. We said we already had included that in the overview. Long silence on the other side, “but where are the costs”? Then unexpectedly our lawyer answered “I am a very cheap lawyer”. And we reconfirmed there were really no other costs. Again a long silence and the conversation continued.
To be fair, we didn’t have to pay our (expensive!) lawyer much. The agreement we had from the start is we would only pay per hour. And only when needed. So we received a new version on the contract, read it ourselves, asked him to provide feedback based on the document and our comments, and send us an invoice for the work done. We wanted to be able to end negotiations at any time, and not buildup some complex lawyer bill. With this setup, you need surprising little lawyer hours whilst still being properly legally covered.
Employees don’t trust their manager
I am a tech person and not necessarily a people person. When running the business, we always tried to be approachable for employees and asked them to inform us if they ever planned to leave the company. To our (naive) surprise, that typically never happened.
From our perspective, it would make total sense for someone to change job every know and then. You only live once! Of course we’d attempt to keep a person trying to learn and fix why they’d want to move away, however sometimes someone would just want change .. which we could then only support. The heads up would allow us to plan for the change and train/hire for a smooth transition.
In practice we learned people are too scared to give the heads up worrying it may negatively impact them. I never understood why, since we honestly never had that intention (or practice). Until .. I became an employee myself and was no longer the owner. There are too many variables that as employee you have no visibility on. A shame, cause open communication truly benefits both the company as well as the employee. I am yet to figure out how to fix this in a future company 😉