Ask HN: How to protect your company during acquisition talks? | Hacker News Reader

Ask HN: How to protect your company during acquisition talks?

5 pointsnickreese5 comments

Aside from Mutual NDAs, what ways do you have to protect your company during acquisition talks?

Backstory: We've built a pretty slick product that people love, makes the market more efficient and we're the first movers with solid brand recognition.

We've got experience selling websites, but this project is quite different. We're about three years old and still have a huge growth curve ahead of us... but there are a lot of new entrants into our space by larger more established companies in our space.

Several of these companies have devoted significant resources to emulating us and 3 have now sent the "are you for sale?" emails.

We've replied to all of them saying now isn't the right timing, but 2 of the companies have hinted that they can offer our desired exit price or more.

How do we best protect ourselves if we decide to move forward with talks? Especially, considering that our potential acquirers are already our competitors.

This is great news. Your product was validated by the market and your competition continues to validate your position as the best of breed. Way to go!

Don't think of these talks as acquisition talks, at least not yet. Use these inbound messages as an opportunity to develop your own business development / M&A skills, as well as a great way to increase your network.

Validate the person reaching out to you. Are they are gatekeeper or a dealmaker? The strategy or BD guy 3 years out of school is a great way to spin your wheels. At large public companies, deals get made or broken at the greater than or equal to VP level. If you are dealing with a gatekeeper, use them to get to the decision maker, but don't sink to much time into the relationship. Once you get to the decision maker, build a relationship without opening up the kimono completely...this could be a future hire, acquirer, mentor, connection, etc.

As far as protecting yourself, there's no great way. Diligence will bring your company to almost a standstill, you'll damage all your metrics in the process and your employees will notice that something is going on; that's just how it is. You need to figure out, generally, if you have a walk-away number and if you are in a position to get it. The best way to do that is talk to a range of people that might know (VCs, other entrepreneurs who have sold similar businesses, investment bankers, etc.).

Here's a secret they don't want you to know. If they are coming to you, in any serious way, they don't feel that great about their current position; so you shouldn't worry about them, just keep doing what you've been doing.

Lastly, if you have multiple serious acquirers, hire a professional team to get you through the process. Find a investment banker with expertise in your area and talk to their clients; bankers are expensive, but good ones are worth their weight in gold. Also, find an attorney you trust that has done this, with companies like yours and companies like your potential acquirers.

Good luck and if you have any questions, feel free to reach out. My info is in my bio.

If you're committed to selling there's no reason to imagine your potential acquirers are limited to a handful of competitors. General investors, related but non-competing businesses [perhaps including your customers] and even unrelated businesses are also in the mix.

If the business is profitable and can be packaged up into something close to a turnkey operation, then marketing it will be even easier. But packaging it up like that means a substantial commitment to selling and the price is a lot of distraction from the core business.

Good luck.

setup a meeting with them. See what they offer and try to get some info about their vision and strategy. If the deal is to weak then turn it into a "nice to meet you let's chat about our progress in the future". If it's a good deal then you'll be in a better place to answer your own question.

Just an email with "are you for sale" means nothing. You shouldn't even read it unless you're willing to hear about a potential offer.

> Especially, considering that our potential acquirers are already our competitors.

This is often the case.

Have you talked to an M&A lawyer yet?

We haven't, just our general council. To be honest, we aren't packaged to sell yet... and in general we're not even convinced we should sell. My fear is that this will be a timesink and a fishing expedition.

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