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I almost sold Baremetrics for $5M

baremetrics.com

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Re: I almost sold Baremetrics for $5M

#201

Post by megablast »

quickthrower2 wrote: post #138

Sounds like there needs to be a way for the buyer to put some skin in the game. Maybe asking for a $50k non-refundable deposit to kick things off. Sounds harsh? Well non-refundable deposits are a thing in real estate. For example in my country it is common to put 0.25% down to take the property off the market, non refundable, allowing you to do due diligence and then 19.75% deposit within 5 days non-refundable, with…

If cost ATT $4B after it failed to merge to T-Mobile.

https://en.wikipedia.org/wiki/Attempted_purchase_of_T-Mobile...

Re: I almost sold Baremetrics for $5M

#202

Post by grogenaut »

ngngngng wrote: post #60
meritt wrote: post #17

Earlier quoted context omitted.

Sure, Amazon does it all the time to small startups. They fly you into Seattle, setup a fancy meeting with strategy teams and M&A, make you run through a pitch deck, explain every aspect of your business. They take diligent notes until they fully understand your inner workings, they tell you thanks, you'll hear from us soon. And nothing happens, 6 months later AWS launches your exact product. Founders need to be extr…

Why don't companies go in with something akin to an NDA saying you can't use any of this information to directly compete with us for x years? Seems like this would be standard if it's common practice to steal businesses while feigning interesting in acquisition.

The typical construct for a big company to use is they get a technical expert from a completely different part of the company that has basically no stake in the group that is evaluating the acquisition to do the technical due diligence. This is where you see all of the secret sauce. Usually they picked someone that I won't have a problem saying no to anyone actually asking them for information.

However the real protection is in the details in the amount of work that actually has to happen to copy a company. I've done technical due diligence work before and I really wouldn't be able to replicate what I saw in a 6 hour code review of 30000 lines of code any faster than I could just coat it from scratch. the most part you're doing basically the same thing you would do on a security audit of code which is looking for intellectual property theft or the overall quality of the code and things like did one person maintain the entire thing or was it actually a team effort which helps you decide who you want to acquire from the company. generally the whole point of these deep investigations is to mitigate risk for the purchasing company not to steal ip.

At the end of one of those investigations you basically say yes it's risky no it's not this is who worked on it this is who didn't this is my estimate for how long it would take to pull into our code base or move over power systems or here is a flexible I think that could basis versus how much technical debt I think there is. but really all they want out of you is is this a risk to buy this company or does it seem straightforward. Then you go back to your completely unrelated arm of the company and do your actual job.

Re: I almost sold Baremetrics for $5M

#203

Post by ablekh »

einarvollset wrote: post #188
czbond wrote: post #135

Earlier quoted context omitted.

Fair and thank you for that. Wouldn't their value to Stripe be much more than 3.75x in this case?

Basically, there are 3 types of buyers: value PE, growth PE and strategic. Value pays 3-4x, growth 4-7x, strategics ¯\_(ツ)_/¯ Stripe would be a strategic for Baremetrics.

Hmm ... Where did you get these multiples from? Based on what I've seen in many sources (here's one that I have at hand, by McKinsey: https://www.mckinsey.com/business-functions/strategy-and-cor...), high-growth tech/IT startups are valued (and, I assume, could be acquired) at > 15x, sometimes even > 20x.

Re: I almost sold Baremetrics for $5M

#204

Post by xwowsersx »

adventured wrote: post #141
xwowsersx wrote: post #123

Can breakup fees be negotiated in these kinds of deals to protect the would-be acquired company? Seems like the company to be acquired bears all the risk.

You can negotiate anything you want, and I'm not joking or being sarcastic about it. A lot of people in this thread will say: well, it's unusual or non-standard to do x y z. Good. Most of the interest a company receives re acquisition is going to be pure bullshit at best and malevolent at worst. Ideally you cause the majority of both types to turn tail and run away immediately. If you're not careful you'll waste an e…

Thanks for the reply, I agree with you. Parenthetically, I know you can negotiate anything you want. I went to law school (though never practiced) and I find one of the common misconceptions is that contracts are these highly fomulaic documents with no room for creativity. The reality is, as you say, that you can put whatever you want in there. Contract law is mostly about enforcing the freely-negotiated agreements between parties. I wrote a lot of contracts that were highly specific to the scenarios in question and there was a ton of creativity - only trick was to use very precise language (verbose bordering on annoying).

My question was more whether this is something that is done in such contexts, namely smallish acquisitions. I think you're right that Baremetrics made a mistake here in not insisting on some of the things you mentioned.

Re: I almost sold Baremetrics for $5M

#205

Post by conductr »

6gvONxR4sf7o wrote: post #160
quickthrower2 wrote: post #138

Sounds like there needs to be a way for the buyer to put some skin in the game. Maybe asking for a $50k non-refundable deposit to kick things off. Sounds harsh? Well non-refundable deposits are a thing in real estate. For example in my country it is common to put 0.25% down to take the property off the market, non refundable, allowing you to do due diligence and then 19.75% deposit within 5 days non-refundable, with…

Or just have the buyer pay both sides' acquisition related fees from the get go (legal, accounting, etc).

No you don’t want your lawyers getting paid by your buyers. Massive conflict of interest

Re: I almost sold Baremetrics for $5M

#206

Post by elbear »

paulcole wrote: post #88
elbear wrote: post #74

Earlier quoted context omitted.

More like missing out on 2 mil

Spending $5 on a losing lottery ticket isn't missing out on $100 million.

I know what you mean, but we're talking about someone's perception, not the mathematical way to see things.

Also, winning the lottery and almost selling your business don't have nearly the same probability.

Re: I almost sold Baremetrics for $5M

#207

Post by charlesdm »

Mr_2020 wrote: post #169
quickthrower2 wrote: post #138

Sounds like there needs to be a way for the buyer to put some skin in the game. Maybe asking for a $50k non-refundable deposit to kick things off. Sounds harsh? Well non-refundable deposits are a thing in real estate. For example in my country it is common to put 0.25% down to take the property off the market, non refundable, allowing you to do due diligence and then 19.75% deposit within 5 days non-refundable, with…

~$8m price. Asked for $25,000 break fee to cover our costs. Was balked at. Have no reason to believe they were not serious buyers as they bought another company or two.

I'm based in Europe but together with a partner I'm a buyer of small tech businesses. We have bought businesses so are credible and are always interested in buying more. We could pay $8m if an interesting business came along.

The issue is that a lot of smaller deals fall through, either because of unrealistic final price expectations by the seller or because some metric that is super important to the business was calculated and supplied in the wrong way (i.e. churn). Or there are issues in structuring the contract because the seller (or his legal advisor) "overengineers" the contract -- lawyers can and sometimes do end up killing deals.

As a buyer, if I pay you a $25k fee, you now have leverage over me. Because if the deal doesn't happen I'm out $25k. If I don't pay you anything you're incentivized to get the deal done and try and draft a balanced sale/purchase agreement that works for seller and buyer. That means both parties making concessions on terms. In my mind, that is healthy, because if we finalise the deal you're getting a bag of money.

Let's say there is a clause we just can't find each other on. No worries, we can jointly decide to walk away. If I paid you and you're not willing to budge, then I'm out $25k if I walk away. It doesn't keep the discussion balanced.

Add to that that some people might (in the end) be unsure whether they even want to sell or not, and you end up in a situation where it's all mostly uncertainty (for both parties) until the deal closes.

Re: I almost sold Baremetrics for $5M

#208

Post by blrgeek »

ablekh wrote: post #203
einarvollset wrote: post #188

Earlier quoted context omitted.

Basically, there are 3 types of buyers: value PE, growth PE and strategic. Value pays 3-4x, growth 4-7x, strategics ¯\_(ツ)_/¯ Stripe would be a strategic for Baremetrics.

Hmm ... Where did you get these multiples from? Based on what I've seen in many sources (here's one that I have at hand, by McKinsey: https://www.mckinsey.com/business-functions/strategy-and-cor... ), high-growth tech/IT startups are valued (and, I assume, could be acquired) at > 15x, sometimes even > 20x.

For public companies, growing > 40%, ARR > $100Mn, NDR>125$ revenue multiples are sky-high ATM.

For private companies at around $1Mn-$3Mn ARR growing sub-20% YoY there are very few buyers in the first place.

Re: I almost sold Baremetrics for $5M

#209

Post by ablekh »

blrgeek wrote: post #208
ablekh wrote: post #203

Earlier quoted context omitted.

Hmm ... Where did you get these multiples from? Based on what I've seen in many sources (here's one that I have at hand, by McKinsey: https://www.mckinsey.com/business-functions/strategy-and-cor... ), high-growth tech/IT startups are valued (and, I assume, could be acquired) at > 15x, sometimes even > 20x.

For public companies, growing > 40%, ARR > $100Mn, NDR>125$ revenue multiples are sky-high ATM. For private companies at around $1Mn-$3Mn ARR growing sub-20% YoY there are very few buyers in the first place.

I was definitely talking about the first category (though not necessarily public only; AFAIK there are some [many?] private companies that fit that profile). I agree that those revenue multiples are high, though I'm not sure I would refer to them as "sky-high". Who knows what kind of numbers we will see in the future ... ;-)

Re: I almost sold Baremetrics for $5M

#210

Post by mrtksn »

thethimble wrote: post #199
mlyle wrote: post #178

Earlier quoted context omitted.

Deals take a lot longer than 7 days to close-- especially real acquisitions, but even asset purchases usually take months.

There's a lot of misconceptions here around how corporate acquisitions work. Here's typically how things work in practice when companies are sold: - Seller attempts to garner interest, sometimes facilitated by an investment bank. - Buyers indicate interest informally, eventually culminating in a Letter of Intent (LOI) from each buyer indicating a price and other important factors related to a deal. - A cricitical com…

In the OPs case, the buyer was not disclosed. Did they lose any reputation? How to roll the ball to let people know that someone screwed you up without damaging own reputation?
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