Advice for Surviving a Buyout?

Anonymous for Good Reason asks: "I'm working for a small-medium sized software company that looks like it's going to be bought by a much larger company. We (employees) aren't being told anything yet, but the behavior of our management and some of the information we have been asked to provide all make it pretty clear that somebody is going through due diligence and trying to close the deal. How have other people fared during these kinds of buy-outs? What did you do to make sure you kept your job and weren't RIF'd after the dust settled? How did your stock options, pay, benefits, etc transfer, and was there anything you would have done different to protect yourself? Was the cultural change a problem, or were you welcomed warmly into the fold? I'm mostly interested in stories from people whose companies were bought by the really big players (IBM, MS, Sun, CA, HPaq, etc.) since that's what this will probably be. Since I have never been through a merger of this type, I'm not sure what to expect and with the current economy I would like to increase my chances of staying employed. Any insight the Slashdot crowd has would be interesting."

Comments

It depends on the Company

[Anonymous Coward]

The HP-Compaq-Digital buyout wasn't too traumatic for most of the folks who worked at DEC, but that was a biger company buying a big company. Interaction with "new" management was shielded from many of the people who used to work for DEC.

The part of DEC that got bought by CA was destroyed. Most of the folks didn't make it past the end of the first year, and you could count on one hand the number of people who made it past 2 years. (Out of about 150.) Many speculated that they bought the division of DEC that they did to eliminate competition.

CA's "Culture" was very, very different than it was at DEC, and many people considered it to be employee hostile. The attrition rate was aboout 2% per week.

I lived thru the network business at DEC getting bought by Cabletron. That was another culture clash as well, but not as strident as the CA one.
In this case, many felt that it was a company that bought a good sized business and didn't really know how to get the value out of their new products and employees. It, too, shrunk from something like 1400 people when the deal was announced to 800 by the time the deal was closed, to about 100 by two years latter. Then, that business, with no (new) products, and most of the knowledge of the current products gone out the door, was spun off to another tiny company, which
still exists today, but much smaller, since they layed off most of the remaining engineers.

Bottom line, it depends on who is buying your company and why, as well as the attitudes of the new buyer. If they can deal with absorbing your company, and have an interest in continuing the products, then there is reasonable hope.

Buyout experience.

[BitGeek]

First, getting bought out is a lot better than getting laid off-- I've ridden a couple companies all the way down, and let me tell you its no fun.

My experience with having our 40 person company bought by a 40,000 person company:

1- Stock options. They paid off well. And the company handled all the unvested options by sending a separate check covering the value of those options (We were bought for cash).
2- When you get bought for stock (which is more likely) suddenly, you're an investor in this other company. You need to go out and do good research on this company to decide whether this company is a good investment. whether your share of the company getting bought is worth $1,000 or $100,000 -- you now have invested that amount in the new companies stock. If this is a bad investment, you need to start moving your money out! (And if this is a big percentage of your net worth, diversifying may be a good idea.)

If you've spent a couple years investing and know how to do this analysis (and your "Analysis involves actually reading their financial reports, and determining the right price, not just momentum) then you already know what to do. If not, the only short cut is to go to quicken.com and get their one-click scorecard for the company buying you. Use the NAIC Rules or the Buffett method. If the company is not a "buy" under these criteria, and the reason is more than one thing (or the reasons are fundamental ones- and the company hasn't been a buy for awhile) then you probably should consider selling. I'm not giving you advice- I don't know squat about the company thats buying you-- but you are essentially selling your stock in the old company and buying stock in the new company at the price of the deal! IF that price is not a good one, then its a bad investment! Even if it seems like "free money".

3- You're probably going to get better benefits. big companies tend to have these worked out, with lots of little benefits, etc. The biggest benefit you risk loosing is vacation time, as bigger companies tend to be less smart about this than small companies. Ask for adjustment to your salary to cover the weeks you lose if you lose any.

4- Bigger companies do weird things. They will likely put lots of silly contracts in front of you. In my experience, they asked us to sign something that was illegal or unenforceable in our state. I balked and the HR drone didn't know what to do-- but the HR rep was cool about it, and impressed when I showed him the law in question. Generally, I've found you don't have to sign all the silly paperwork. FRankly, in reality, all the paperwork you already signed you're still bound by, and they still have an IP contract and all that, since they bought the company and your responsibility transferred with ownership-- so if they ask you to sign new noncompetes, and stuff like that, take that for the negotiation opening it is and make sure you don't get screwed.

4- Layoffs. I was laid off about a year after the company bought us. They laid half our staff off cause they realized they probably shouldn't have bought us. The severance package was good, and that was a pleasant surprise. When a startup goes under the severance is usually two weeks, this was much better. How to avoid being let go? Be a good employee. Usually they don't reorg the whole thing... but many people start bucking for positions inside the larger company. If you smell layoffs, get on the larger companies intranet and find other position there to apply for. You have an advantage by already being an employee.

5- You have warning, if you haven't already saved 6 months of living expenses, start putting away %25 of your gross income now. IT almost always takes a couple months for them to start axing people-- if that's what they're going to do-- and so the next six months will allow you to save a couple months salary.

You're right to be wary-- be conservative with money, seriously look into the new companies stock to see if its a good investment, and keep your bosses happy-- they'll probably be your new bosses and if layoffs come, they'll have to decide who gets to go.

Good luck!

Re:Happening as we speak...

[perljon]

Businesses exists to make money, not to employ people. Every place I have ever worked, I get at least a paragraph about how no-one can make me a contract offer except the President and employment is at will for the employer and employee. I'm sure this is EVERYWHERE, cause I've even seen it on my High School Donatos Pizza application.

Where in the world do employees then get the idea that a company is entitled to give you a job? You knew the conditions of the relationship before you started; why do you honestly think you have room to bitch about them when you get axed?

Also, a lot of people have the idea that it is immoral to fire or lay someone off. Why? Because you expected to work there until it was convenient for you to quite? With the same argument, it is then immmoral for a person to quite or retire from a job. Afterall, the company expected you to work there until they didn't need you any longer.

I'm just an employee of a large insurance company, but I'm a realistic. We have a deal. I give 40 hours, and they send me a check every two weeks. I get certain time off, and some other benefits while I'm working there. It's in writing. If for some reason, they don't need me anymore or they can't afford me, they can lay me off. If for some reason, I find a better opportunity some where else, I can quit. If the company lays me off on good terms (severence package), I may come work for them again. If I leave the company on good terms (2 weeks notice), they may let me work for them again. I UNDERSTAND THE AGREEMENT. Don't read into it or make assumptions beyond this. They don't exists. If you don't like the agreement, find some other way to make money; ie, start your own business.

Think about that... starting your own business. Whatever you are doing, whatever your skills are, you are producing a profit for your company. Use those same skills to produce a profit for yourself. A little easier said than done, and a lot riskier, but it's a different agreement, and you can't get fired or laid off. You also won't get paid for lazy days or weeks or whatever, but it's a different arrangement.

Other possible arrangements include those of thievery, black market sales (ie, drugs), conning, marrying into money, hoping for rich granny to die, winning the lottery, living on the street, moving to a warm place and living on the street, traveling the world teaching english for food and shelter, mooching off your parents-friends-sibblings-etc, selling sex on the street corner (after all, it's my sexy body and i'll do what i want), sueing everbody, or even asking for donations and when refused suing for racial discrimination (it works for jesse jackson), living off of wellfare checks and food stamps, begging for change, begging for change on the internet. Send me $20 and I'll send you pamphlet on these alternative arrangements.

DISCLAIMER I neither advicate or advise doing anything illegal or immoral to make a living.