Acquire me! I'll take you to dinner first!

Anonymous — Sat, 08 Mar 2008 11:38:36 -0800

What happens when a little company is interested in getting purchased by a big one? (Take two.) (Sorry if you happened to spot the first question. I used bad html and broke it.)

In the exact reverse of this previous AskMe, I need some advice about acquisitions and venture capital. I am a senior executive at a small young company (less than 200 employees) that is a leader in the niche tech field of doodad design. I run the unit that handles all our North American doodad efforts.

For several solid business reasons, the founder/president has always been open to selling this unit, although not extremely motivated (there are other sexier units of the company that he likes to be more involved with). But there has been a change in the market: last fall, quietly, a big multi-national technology conglomerate with no previous doodad business picked up a similarly sized small doodad company (an indirect competitor of ours; their doodads don't serve the same customer base that ours do, but it wouldn't take long to add that functionality via development). Since then, several competitors of the conglomerate have been discreetly sniffing around us.

I have convinced the president that right now is a good time to accelerate the acquisition effort. He has given me the green light to go forth and seek a potential buyer. After much research, I have created a short list of companies that I think will have interest. I believe that our NA doodad unit offers everything that improves shareholder value as a bolt-on acquisition (including exceptional market share and brand awareness, synergy, cutting-edge technology, human resources that are tops in the field, and high return on the economies of scale) and very little that decreases shareholder value (we have no debt, it would be a relatively cheap acquisition, and so on).

So... what next? How would a huge global entity expect to be approached in this case? And to whom? I literally have the clearance to call up [some top person at a conglomerate on my list] and say, "So, do you have a few million lying around?" (I kid; I know that wouldn't be the tactic.) But what is the best tactic? What's the best way to get my foot in that door? What should I expect in a get-to-know-you process? What will they expect to see in the pitch? I understand pitching the broader strokes: valuation, projected revenue, being able to demonstrate our market activity, and so on... but is it presumptuous to plan for how I foresee the unit functioning as part of a new entity? Or does a global conglomerate not really care about the suggestions of Tim Smith, Doodad VP? I'm not worried about the legal and financial due diligence part, since once a solid lead came into the picture, my president would bring an outside team in to handle that part of the process.

Also, I have seen that in several similar deals in my industry over the last few years, the two parties came together via a consulting firm, some group that advises specifically on this kind of dea. Do we really have to consider using an intermediary? (I've been offered a finder's fee by the founder if I can bring in a legitimate buyer candidate and the deal goes through, but I wouldn't want to have to share it with a broker.)

FWIW, I believe that we are in the best position to get acquired, as opposed to obtaining (what would be) stage 3 or mezzanine funding. But, I also know very little about the VC world and what the trends in the market are right now, so I could be wrong: is mezzanine funding the way to go here? The founders are going to want to divest of the unit completely, not just get a cash injection in order to then have to futz with it even more; this would necessitate restructuring the management of the unit (which wouldn't really be a bad thing). Am I right in my understanding that a VC firm won't want to bother with an outfit that isn't already fully contained, that needs to fill some management holes?

Also, I am very nervous about the possibility that I am opening the door to being out of a job. There's really no way to absolutely guarantee that I stay employed if we get purchased, is there?

I'm sure there are additional questions that I should be asking that I don't know to ask. Any thoughts, resources, experiences are welcome. Btw, I'm also looking for a mentor to help me navigate this (frankly overwhelming but exciting) opportunity so if you can suggest anyone, I'm all ears. Email me at acquisitionaskme@gmail.com if you need more info.

Trying not to screw myself.

rhizome — Tue, 06 Feb 2007 14:13:35 -0800

How do I figure out if I should go along with my company's acquisition? I was about to find another job when the tiny (<10ppl) company I work for was acquired by a much much larger one. The new company is well-known, creative (video games), great benefits, etc. The downside for them is that instead of riding my bike to work I'm going to have to commute about 40min each way.

The stickler is that I started working here 9months ago at a lower salary than I'd preferred with a promise of a review at 6mos. As the old story goes, I was too busy at 6mos to request the review and my boss did not take it upon himself either. I did remind him about a month ago, to which he said we could do it the first week of February. In the meantime, the deal goes through and I get an offer letter from the new company at my current number. This has me seething because he put me off of the review right as the deal was happening, so I'm quite miffed at how he weaseled out of his promise. We have met over this issue because I have so far refused to sign the employment agreement, but he says there's nothing he can do or that we can see what happens once we're at the new company (and HR is out of his control, natch).

It's probably old news that people get exploited in business, but I've been busting my ass here so much that I haven't had time to meet with the recruiter who has been chasing me for months!

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Acquire me! I'll take you to dinner first!

Trying not to screw myself.