What to expect in a company acquisition?
April 22, 2010 1:43 PM   Subscribe

My small company is probably going to be sold to a much larger competitor later this year. Since the two companies are in different market tiers, and we're already well-established in ours, they will almost certainly keep our company intact and we will become a subsidiary of them. As an employee, what should I expect? Has anyone been through something like this?

I work at a company of around 50 employees. We are owned by a private board of investors. It's no secret that we haven't been doing too well financially in the past couple of years, and the board is eager to get out from under their investments.

Despite all this, our main product is cutting-edge in the field. Our financial troubles are caused primarily by some very bad management decisions in the past couple of years—but we do have a very solid product. A much larger company in our same field (but a different market tier) is very eager to buy us, and I anticipate that they will pull the trigger within the year.

We are well-established in our market and I don't think the acquiring company would dissolve our brand. I expect that they would keep us as our own company and would just make us a subsidiary, using us to break into this new tier, as well as licensing our products for use in their tier.

That said, I'm wondering about what I should expect if and when this all goes down. Particularly in 2 areas:

1. Due to turnover, I know more about this product than anyone else in the company, despite being pretty low on the totem pole. I am not exaggerating when I say that if I (or any one of maybe three or four other key people) were to quit, it would mean very bad news for the acquiring company—it's a complex product that behaves very differently in the real world than it looks on paper. Do acquiring companies generally have a good understanding of the value of the knowledge base? Do you think they will go to great lengths to ensure that this knowledge base remains intact? (As is the case with many small business employees, I am horribly underpaid yet very loyal. But my loyalty doesn't automatically extend to the new stepdad.)

2. It's obvious to anyone doing their research that our management has made some pretty bad decisions that led us to where we are now. When a failing company is acquired, what typically happens to the management? Would they be repositioned, or just removed outright?

Beyond these, I'm also interested in any other experiences/anecdotes from people who have been in similar situations.
posted by relucent to Work & Money (5 answers total) 2 users marked this as a favorite
The acquiring company will do due diligence (i.e. ask probing questions) before the purchase to find out who the key people are. They will probably offer the people they determine to be key more restrictive 'golden handcuffs' than other employees get (in SF startups, you might get an extra 12 months vesting for staying 6 months after acquisition. CEOs and other senior management might get more vesting or shares, but only if they stay a few years).

What else to expect: expect a huge culture clash, no matter what. Also, expect that, there will be some haves and some have-nots after the acquisition, and this may strain existing friendships and work relationships.

Will people get axed? Redundant staff (sales and marketing) are often the first to go. People who make things - who came up with and maintain the product - are generally much more secure.
posted by zippy at 2:31 PM on April 22, 2010

They may also consolidate administrative functions (accounting, billing, HR, purchasing and the like) and move your company to some of their computer systems. they could move some of their managers into your operation. Benefits could also change, for better or worse., depending on what they currently offer. Since you're in the same market segment, culture clash could be moderate, but there will be some. They could change manufacturing specs if they see any cash holes in yours, but that would take some time.
posted by path at 4:00 PM on April 22, 2010

I've been through this about four times now, where the smaller company I worked for was acquired by a larger competitor. I can only speak from my own personal experience, but this is my take on things. If you detect a somewhat cynical tone to this, you would not be wrong.

You will probably be told that everything will stay the same, and that you'll get to continue as a subsidiary with your corporate culture intact. This is a lie. Possibly not a deliberate lie, but a lie just the same. Sooner rather than later you will be doing things the way the parent corporation does them, regardless of whether or not that makes sense for your business or your customers.

Keep your eyes open and your mouth shut, and don't expect anyone in the new parent company to see things that are obvious to you. Also, do not expect them to care that they are doing things that to you are not in the best interest of the business. Do not, under any circumstances, bad mouth the people in your company that you see as being responsible for the poor business decisions to any one at the new parent company.

Do not expect anyone at the parent company to care that you are a key knowledge holder for your product, especially if you are not a manager or otherwise someone who is not "low on the totem pole". To them, you are just another replaceable unit. The guy who calls you into his office to let you go at noon on Friday is going to go home at 5pm to enjoy his weekend. The fact that your coworkers who are left to pick up the slack are now working 12 hours a day for the next six months is not something he is going to concern himself with.

Like I said, this is all a bit cynical and pessimistic. But everything I say I can say from first hand experience - not once, but four times over 8 years. Hopefully this pending acquisition will turn out to be a positive experience for you. But don't hold your breath, and keep your resume updated.
posted by ralan at 4:04 PM on April 22, 2010 [2 favorites]

OH, and, since you're a smaller organization, they could just move your operation into their facilities, taking some people they see as key, and leaving the res behind.
posted by path at 4:11 PM on April 22, 2010

I've been on a similar boat a couple of times.

First, same scenario. Little startup, excellent technology, purchased by a bigger (public) company. They really dont care whether management has made bad decisions or not. They are purchasing the product, the technology, not the management. Most likely, they're gone- with a big lump sum.

If you are on the R&D side of things, (like I was), and you're good at what you do, then you are pretty safe. Culture clash next to none if on the same market segment (geography affects as well- is the acquiring company in the same city or area?

Very important question: do you have a selling product? i.e. have you gone thru at least a couple of revisions of the product? or very early startup, with few customers, but not really a mature product?
If the later is true, then your product might be canned. Seen this happen a couple of times. You'll have time to move on to their side before that. If a mature product, then even safer, but expect sales, marketing, even R&D management and styles to change. Again, enough time for you to show your skills and move horizontally into their side if things go wrong.

Enjoy it. It's always fun.
posted by theKik at 8:24 PM on April 22, 2010

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