Anatomy of an Acquisition
Discuss The Business And Human
Sides Of M&A
DC -- February 24, 2000)
financial planning, negotiation strategies, valuations, intellectual
property protection—they're just a few things to prepare for when
selling your business. Nonetheless,
the panel at today's Netpreneur Program Coffee & DoughNets meeting
all agreed that the most important factors in this ultimate business
decision are not dollars and cents, but people and emotions.
Master Oron Strauss Says "Be Prepared" With Seven
Lessons Learned From Being Acquired
1. It takes forever. Ten
months for Net.Capitol, six for ToFish!. At least you have time to learn a lot about the people who
may make up your new team.
Use it wisely.
2. It ain't easy. Net.Capitol's
agreement with Netivation was 200 pages long.
ToFish!'s was even bigger, so get good advice in order to
get a good deal.
It's personal. A lot of
people have a stake in the outcome of your decision, and an
opinion about it as well. As CEO, your job is to balance the interests and make the
right things happen. Remember,
it's not just your life that is affected by those decisions.
4. You learn who your friends are.
Things can sometimes get nasty when people's
futures and egos are at stake.
Separate the emotion from the deal.
5. Don't forget your people.
Get all of your constituents on board, including
employees, customers and investors.
You'll find valuable insights and support.
6. The future matters. There
will be more things to do after the acquisition, not less.
You'll be doing them in a new role, with new people and a
new culture. Are you ready, and is that what you really
7. You're always an entrepreneur. You started your company for a reason. Don't forget why, or who you are.
had no idea how emotional this experience was going to be,"
confessed Raj Khera, who sold his firm Govcon
just weeks ago.
the high profile of Internet IPOs, acquisition is the predominant exit
route for successful entrepreneurs.
According to moderator Alexandra Reed Lajoux, an expert and
author on mergers and acquisitions (M&A), there are approximately
400-500 such deals a year in the technology sector, at an average
price of $300 million and a median price of $35 million.
Khera and Lajoux to discuss what it's like to sell your business were
two other young netpreneurs who recently did just that, as well as
Mario Morino, a 30-year technology industry veteran who has been on
both sides of the negotiation table many times.
While they all spent a good bit of time providing practical
advice on the business aspects, the human factors were the recurring
are about people," stressed Oron Strauss, whose company, Net.Capitol,
was recently acquired by Netivation.com. There is one upside to the fact that the deals can take so
long to close, however. Strauss
said "It forces you to build a relationship.
Are these the people you want to team with? Ultimately that is the personal decision that you and your
management team have to make."
Morino agreed. "You
may negotiate the greatest deal," he said, "but if the
chemistry and mechanics don't work, post-deal you lose."
means two things for the acquisition process.
First, you have to contend with emotions—yours and those of
your employees, customers, investors and the would-be acquirer.
It requires soul searching, thinking ahead and knowing what you
really want out of the deal.
It also requires you to remember the obligations you assumed
and the promises you made to others long ago.
personal," explained Strauss, and it isn't easy.
"Negotiation is tough. Bringing
your people around is tough. You,
the CEO, are right in the middle of it.
It is an incredible balancing act to try to bring together a
number of different constituencies and make as many people happy as
more, life goes on after the sale, often with a new culture and a new
role for entrepreneurs who stay on, as most do for at least a while.
What does that mean for Frank Wood, who just sold his company,
ToFish! to America
Online? Asked by an
audience member, "What about the culture fit when a small company
is acquired by a big one?" Wood
deadpanned, "I sit in cubicle 4BHO8 and I'm really happy."
complexities are the other reason why people are the heart of any
deal. You have to
assemble the best minds that you can for advice, support and active
their talks, all of the panelists credited others when telling stories
about the process, from Strauss who got help from one board member in
overcoming the objections of another to Khera's strategy session with
a mentor while driving from the
first negotiation. Wood's
advice is pointed, "Find somebody to help you through this
process if you haven't done it before."
He credited Gina Dubbe of ToFish! investor Steve
Associates for the success of their
deal. Wood said she
"saved the day more times than not."
is when you don't worry about paying an attorney $500 an hour,"
Morino advised. "Don't
do it normally, but at this point in time you go for the very best,
even if you have to bypass your existing counsel.
You are dealing with your life, and you don't want do make a
and emotions are just part of the matrix for what is still a business
presentations and Q&A provided much practical advice on both
strategic and tactical issues, all recorded in the transcript and
streaming video of the event. While
it will take hard work, planning and sound advice to tackle those
business challenges, just be sure not to forget the human side.
Deals close and events pass, but people go on. And they remember.
entrepreneurs go on, too, often to pursue other ideas.
Khera did not join VerticalNet with the acquisition, choosing
instead to pursue a second business he has been building, Morebusiness.com,
a Web resource center for small business.
Woods may be happy in his cube at AOL now, but, "I plan on
doing it again at some point in the future," he said.
Strauss believes that once an entrepreneur, always an
is about your life, and chasing your dream and living out your
destiny. Have fun with
it. Enjoy the
2000, Morino Institute. All rights reserved.