> Your post-money valuation is a hard floor on your sale price
> Punctuated by fielding calls from confused angel investors.
Can someone ELIE - explain it like I’m an engineer?
What I learned selling my company
31–40 of 104 posts
Re: What I learned selling my company
#32> I was advised that 50% of signed LOIs actually close. I bet it’s less. You will see the LOI and dream of trading stress for riches. Remember: Less than 50% chance of closing. 100% Which is why I hate that exclusivity is industry standard. It feels exploitative that acquirers can demand exclusivity in a deal when the chances of it closing are less than 80%. Imagine selling a house and taking it off the market becaus…
As a seller, not going exclusive is an absolute PITA.
Based on anecdotal experience, I'd bet that most of the "50% of signed LOIs" don't actually close because the seller misrepresented themselves.
> There’s an extreme power imbalance in favor of acquirers.
Buyers do NOT like dead deal fees (it doesn't get paid out of the LP fund), so there is little incentive for them to play games there. So, no, this is not true.
Re: What I learned selling my company
#33Work in M&A. Have been involved in 500+ M&A deals and also sold a company. These are very good insights!
Great validation. What (maybe more nuanced) insights would you add?
The author basically says this - but companies are not sold, they are bought.
Build a great business and focus on running a great business. Selling is just time in the market. If you're creating value, someone eventually will want to buy you (US centric mindset btw).
Re: What I learned selling my company
#34"Once you get an offer, try to generate competing offers from your key relationships"
I've always seen the statement of getting competing offers but how does it actually work in reality?
Is it as simple as contacting the key decision maker from competitor and saying...
"I've got an offer X, what can you do?"
Re: What I learned selling my company
#35> I was advised that 50% of signed LOIs actually close. I bet it’s less. You will see the LOI and dream of trading stress for riches. Remember: Less than 50% chance of closing. 100% Which is why I hate that exclusivity is industry standard. It feels exploitative that acquirers can demand exclusivity in a deal when the chances of it closing are less than 80%. Imagine selling a house and taking it off the market becaus…
As a seller, not going exclusive is an absolute PITA. Based on anecdotal experience, I'd bet that most of the "50% of signed LOIs" don't actually close because the seller misrepresented themselves. > There’s an extreme power imbalance in favor of acquirers. Buyers do NOT like dead deal fees (it doesn't get paid out of the LP fund), so there is little incentive for them to play games there. So, no, this is not true.
> So, no, this is not true.
I don’t think you’ve provided any evidence other than “buyers like to make as much money as possible at others expense” which everyone knows to be true which doesn’t bear much weight on a skewed power balance existing.
Re: What I learned selling my company
#36> I was advised that 50% of signed LOIs actually close. I bet it’s less. You will see the LOI and dream of trading stress for riches. Remember: Less than 50% chance of closing. 100% Which is why I hate that exclusivity is industry standard. It feels exploitative that acquirers can demand exclusivity in a deal when the chances of it closing are less than 80%. Imagine selling a house and taking it off the market becaus…
These are definitionally the most sophisticated buyers and sellers in the entire economy. Organic market norms dictate what the industry standard is; it doesn't make much sense to think about protections. If you're selling, and you want some kind of protection, structure the dealmaking or negotiate the deal to get what you want.
> it doesn't make much sense to think about protections
Why?
If I’m going to put my business on hold for 3 months to entertain your offer to buy my company, why would it not make sense to make sure the buyer is serious enough to offer something they shouldn’t need to ever pay out if they are serious about their offer?
> structure the dealmaking or negotiate the deal to get what you want.
You usually have lawyers doing a lot of the legal strategy for you. It’s easy to say “negotiate what you want”, but realistically this negotiation happens via redlines back and forth between lawyers who consult the buyer and seller who both make concessions. Whether or not you make a concession is often influenced by what’s most commonly occurring in other deals.
What’s most common in other deals doesn’t automatically equate to what’s the most fair and balanced transaction terms.
Re: What I learned selling my company
#37Be profitable.
It’s implied when OP says “run a good business”, but as someone who’s been on the acquiring side - it becomes a lot harder to be the advocate to buy a company when it’s losing money.
(The business case math gets hard fast, with unprofitable companies & introduces a lot more risk)
Re: What I learned selling my company
#38"Once you get an offer, try to generate competing offers from your key relationships" I've always seen the statement of getting competing offers but how does it actually work in reality? Is it as simple as contacting the key decision maker from competitor and saying... "I've got an offer X, what can you do?"
Sometimes, although working with focused M&A bankers is the typical strategy for large transactions
Re: What I learned selling my company
#39>People often get into startups because of the chance for a pot of gold at the end of the rainbow.
Few people will take the chance to join a risky venture if the didn't see some kind of payout down the road. I once left my stable job to join a startup. I took a salary cut and even loaned them money to make paroll. But I got some founders stock and had confidence in the product we were building. It payed off years later when the company was aquired.
But I also knew that I had to contribute effectively if I wanted that company to succeed. Too many will join a startup just to be on the bandwagon if an M&A event happens. They think they will win big even if they do little to make that actually happen. These people are parasites that can kill a startup.
Re: What I learned selling my company
#40Be profitable. It’s implied when OP says “run a good business”, but as someone who’s been on the acquiring side - it becomes a lot harder to be the advocate to buy a company when it’s losing money. (The business case math gets hard fast, with unprofitable companies & introduces a lot more risk)
Surprisingly, that didn't matter for a lot of years until pretty recently.