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What Should I Do When Someone Expresses Interest In Acquiring My Company?

I get asked this question many times in many different ways. Sometimes people are coy about it (“someone is expressing strategic interest – what should I do?”) other times people are clear and direct (“someone wants to acquire my company – help!”).

David Cohen, the CEO of TechStars, has encountered this many times. Before starting TechStars, he was an entrepreneur who sold his company to a public company after running it with a partner for a decade. He then started a few more companies, including one that failed and one that was acquired. Finally, he started TechStars and of the 28 companies from the first three programs (there have now been 126 companies that have gone through the program to date) 8 have been acquired. He’s also invested in a number of companies as an angel investor and I know of at least a half dozen that have been acquired.

He’s got awesome advice in a blog post titled You have acquisition interest – now what? His 10 step process is:

  1. Assess the acquirer
  2. Notify the board
  3. Set your number
  4. Engage the acquirer
  5. Ask for the ballpark offer
  6. Identify mentors
  7. Assess the ballpark offer
  8. Get to know them and answer their questions.
  9. Push for a term sheet
  10. Decide

Go read the post now. It’s excellent and I plan to refer people to it often whenever this question comes up.

February 3rd, 2012 by     Categories: Acquisitions     Tags: , ,
  • Nicholas Napp

    I’ve been through one exit. It’s quite the roller coaster ride.  We stuck to a path very similar to David’s list and generally had a good outcome. Our mentor was an expert at M&A and managed to herd the cats well.

    There was one gotcha that I thought I’d share.

    The company acquiring us was public, so our stock/options were converted in to stock in the acquiring company based on a negotiated valuation and an average of their stock price. 

    So far, so good.

    What was not made clear, and to this day I don’t know where the ball got dropped, was that there would be extensive blackout periods restricting when we could sell the stock. Standard company policy.  The blackout began several weeks before the end of the quarter and continued until several weeks after.

    I, and many of my colleagues, were blissfully unaware of this restriction until after the deal was closed. After the deal closed there was an extremely short period before the next blackout started.  In my particular case, the admin people responsible for approving my transaction screwed up the process so I was unable to sell. By the time the blackout was lifted, the value of my options had dropped by tens of thousands of dollars.

    So two big lessons:

    1.  Watch out for blackouts if the company buying you is public
    2.  Beware the admin people that need to authorize your transaction
    :-)

    • http://www.feld.com bfeld

      Great example. I’ve been there as well.

  • http://www.retailpitch.com Brad

    This is probably one of the scariest and most exciting times in a business.