On December 9th, Venture Archetypes and Greenberg Traurig pulled together a panel of some of the top entrepreneurs and most active acquirers in Silicon Valley to answer your questions about start-up M&A. So whether you’d like to know what the serious players are looking for or how to position your start-up for a healthy acquisition, you’ll find the wisdom right here!. Read the rules.
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How can founders go about getting more than one party interested in the deal to improve leverage?
Twitter (sold Mixer Labs)
|I think, fundamentally, once you have one offer, then it becomes very natural for other people to get interested. That could mean mentioning the offer to advisers. And this is before you sign any sort of exclusivity or anything else, so you need to make sure that you're timing it properly. So if you mention it to advisers or other people who have connections to these guys, and they hear, for example, that Google is looking at a specific company, then they may get interested. And then the company can sometimes end up going through the rounds. Or, alternatively, if it is an interesting enough space where it’s considered a big strategic asset, then often times companies will proactively be going after the company. I don't know anything at all behind the details of what has been happening to Foursquare, but I am assuming that in a lot of cases companies have been going and approaching them versus them having to go and solicit interest. I would also add that you can optimize for valuation, but you don't want to go somewhere that you're going to be miserable. Especially if you have a multi-year vest, because that just means all that value is going to go away because you'll leave early anyhow.|
Director, Corporate Development
|I keep going back to: Why are we doing the deal? Where are we in the process of doing the deal? Because if we're at the point where we're issuing the term sheet, and we're the same way when we issue a term sheet, it will be a no shop clause. We feel like we're dedicated at that point, and we hope that you're dedicated as well. We've assessed it on both sides, so at that point if you actually take our term sheet and go shop it, that would be upsetting for us, quite frankly. And it depends on the kind of deal. If it's DoubleClick, which was owned by a private equity firm, one could argue that it's purely a financial incentive for the private equity firm to run an auction process and try to maximize valuation. It's not about team fit and that kind of thing. But if it's a team fit kind of acquisition and you've gone to Facebook or Google 10 times and you know you've had various dialogs with engineering managers and product managers on what you're going to do, how you're going to fit into the organization, then there's this trust that's been building. If we get to the point that we're issuing a term sheet and then you turn around and shop that, I think that's inappropriate. So it depends on where you are and what you're seeking to do.|
Senior Director, Corporate Development
|The fact of the matter is that Google has tens of billions of dollars on their balance sheet. So if we jerked our head around every time we heard on the market they were looking at something and started chasing it on price ... frankly, if Larry and Sergey want it, they're going to get it. So I think we've taken a different approach and it goes back to a longer dialog and trying to find the right fit and trying to find people who think that truly it's not just about an exit and it's not just about the fact that they are going to get to keep doing what they are doing inside of us, but that there's something that we have, whether it be the reach of the network, the sales force or something that they look at and say, "You know what? Yes, I can get an exit but number two, I actually get to build a bigger business inside of Yahoo!" I think we fully realize the forcing function of getting to a decision on a rapid time line. If we're having someone else in the boat it totally matters, but I think you can't get to hung up on just chasing another offer for the sake of chasing another offer. I would just ask yourself whether or not it's fair. If you think it's fair and it's where you want to end up, you may be completely wasting your time if you're really really in with Amin and you want to end up in Google, calling us, trying to get a competing offer when he's already put a fair offer on the table. That's weird. You should know enough about the differences of the companies, their strategies and the people to understand which one is a good fit for your team and your product. And so I totally understand where Mike's coming from and, again, it's a capitalist country. And you should absolutely go for it and we're all fine with that. We're going to pay what we're willing to pay and you're going to sell for what you want to sell, and if those two things match we're going to get something done and we're fine with that. But remember that, fundamentally, a deal is a beginning, not an end.|
Manager, Corporate Development
|Listen, you are all very smart, and to tell you anything other than the truth would be stupid. Get multiple offers and get a bidding war going, right? If I were in your shoes, that's what I would try to do. There's not a lot of rocket science to that aspect of it. Of course, we're going to tell you we want to be the only home for you. We think we're the right home, we're going to be your best friend, blah, blah, blah. We do think we have a good company and we're happy with what we're doing but, you know, yes, let's talk money for a minute because this is life-changing stuff for many of you. So, get multiple bidders, manage your process, and don't sign a term sheet until you are really sure you want to do the deal. We don't give term sheets unless we want to buy your company. It's not a kind of a joke or a second date for us. It means we really want to buy your company. And by the same token, when you sign a term sheet, a term sheet from us and most companies usually has a "no shop" clause in it. For those of you who don't know what that is, it means that you can't try to get a better deal or a comparable deal. You have kind of said, I'm hitching my horse to this wagon. So don't do that unless you're really sure. Until then, do it a lot and hustle. Hustle because you owe it to yourselves and the people who presumably work for you to get them the best deal that you can.||