Ask MetaFilter questions tagged with buyout

Can we all end up happy?

timshel — Tue, 31 Mar 2009 05:16:17 -0800

Business partner wants to be bought out. What are my options? Details inside. Ms. Timshel asks:

I am in a bit of a sticky situation, and would appreciate any advice. Two years ago, I entered into a Ltd partnership with two very close family members (all based in the UK). We stupidly have no partnership agreement or non-compete clause, but each person is 1/3 shareholder. One of the directors (Partner A) plans to move across the world to start the same business, where only they will profit (i.e. a separate entity from our existing business). They want to be bought out for 1/3 of the current business value. Even though the business has been around a short while, it is very profitable and has a strong brand. That being said, this is not the type of company where she could sell her shares to an outside party.

These are the questions Partners B & C have:
1. If the valuation is far higher than expected, what are our/Partner A's options?
2. Can we specify repayment terms? What if they don’t agree to our terms?
3. If we don’t decide to buy partner A out, are they able to remain a silent partner, considering that they are starting a competing business elsewhere?
4. If partner A doesn’t start a competing business, but still moves across the world, what are they entitled to? In this instance, would partners B and C be able to increase their salaries, as they are working overtime to compensate?

We do intend to meet with a lawyer but would appreciate any advice and insight the hive may have. Thank you!

Leave a Message After the Tone

Xhris — Fri, 20 Mar 2009 08:06:40 -0800

I've become intrigued by the idea of these weekend meetings that the companies/government have to decide to rescue, buy, take-over each other. I understand that it's wise not to release the news whilst the stock markets are trading, but so often we hear about the US Fed meeting with banking execs 'over the weekend' and deciding such-and-such. How do they get them together? Does somebody somewhere maintain a big list of who's who and what their contact numbers are? Do companies of a certain size and type always have access to staff over weekends and the executives whereabouts 24/7 ?

I just would like to hear some details of how the mechanics of getting all these important folk together on the weekend actually works. I mean what if some CEO is fishing in the mountains, or still drunk from last night's swinger's party and has his mobile phone off? Do they lose out the chance to buy ABC bank for $1 ? (or whatever is the subject of the weekend's issues).

Who exactly does the Fed call? (no point calling the main switchboard number of my bank after 8pm on a Friday night!!). Do the company's legal departments or company secretariats organize 24/7 coverage just for emergency goings-on ? Is some poor admin assistant on duty all the time?

Or do those things actually happen Mon-Fri with days and days of warning? And the whole idea that XYZ Corp decided to spend $99 Billion to buy ABC Corp based on a quick chat at 6pm on Sunday night, just a bit of exaggerated drama to feed to the masses ?

Anybody got any real life anecdotes or experience of this?

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.