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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What about the diligence period? What should founders try to push for here and what impacts this time period from the standpoint of Corp Dev?
Twitter (sold Mixer Labs)
|I would encourage negotiating as short a diligence period as possible. That does two things: One is that it streamlines the process in terms of ensuring that there are fewer wiggles and waggles around the road. As you're negotiating, fewer last minute things can come up. But second, it also gives you a shorter window so that if things don't work out with that acquirer, and you are really set on doing an acquisition, you don’t become extremely stale as a company.|
Director, Corporate Development
|It depends because you could front-load a lot of these things. So if it's a purely team acquisition, you would probably want to see resumes, right? You probably want to see some kind of review of the skill of the team, the makeup of the team, and you'd probably want to see that before you actually make a go/no-go decision as the corporate acquirer. But again, if it is a secret sauce which is ancillary, if it checks out somewhere down the process, but you anticipate that process taking 30, 45, or 60 days, what have you. There's a range, and it depends on the size of the company and the complexity. I was just going to add diligence is a two way street. What we find is the smaller companies that are not VC funded, for example, tend not to have their books in order. They tend not to have somebody who can run the business and deal with the disruption.|
Senior Director, Corporate Development
|We ask for what we think is enough time to get something done. We also have auto renewal clauses in there so we don't have to stop and renegotiate, and sometimes people have questions about that. I'm not aware of us ever having gone through a signed term sheet and not closing a deal. I am sure that someday it will happen because you'll find some gnarly, bad thing that will make you walk away. But in general, as these guys have said, we don't take it lightly. If you put a term sheet out there, it's because you're trying to get something done. And then from that point forward, you truly are partners in terms of getting all the information out there, working through the process, getting everyone bought off, and getting it done. And the biggest gating factor is that start ups are going through this for the first time, and often times they have been running their business as they should and don't have everything in a file cabinet ready to show us to prove that everything is in order. So it often takes longer then they imagined to get it all in order. So what I often do is talk about milestones and I basically say on the day that we present this, we'll give you our super-duper diligence list that has all the stuff that we're going to need. If you can get a fully populated data room inside of X date, I will commit to you that I will drive our forces harder than they've ever been driven to hit whatever that date is. So it's one of those things where you have to develop a trust factor to get a deal done. And it's a two-way street, so then if they miss that deadline, it's not that I'm not going to keep trying to move fast, but it's just that we're all on the same page around what's holding it up. And we'll work together to get it over the finish line.||