Slashdot Mirror
Merger (or Acquisition) Recommendations?
pauly asks: "We are a small (5 man) specialized software company which is merging with a larger (200+ employee) company. Basically they are buying us to
add a whole new product line and have us be their development skunkworks. What recommendations would Slashdot readers have before, during, or shortly after the acquisition? This post is not a solicitation of legal advice: we have a very nice contract drawn up which is agreeable to both parties and which we will be signing shortly. We are looking for practical precautions or recommendations.
If you have gone through the same type of deal, what would you do the same, or differently?"
You and your 4 cohorts have managed to create a successful independent software company, and built it to the point where a larger company found it worthwhile to buy you out. Given the business acumen of the typical Slashdotter (Sealand! Regulation is Socialism!) I don't think there's anybody here qualified to give you advice!
Do they really want a skunk works? Will they still want it during the next revenue crunch? If they're actually believers, why didn't they have one already?
Make sure the salespeople know what they need to about your product line.
If you've already negotiated the contract it's too late to talk about precautions.
Scarcely Credible Operation, Software Career Over, Sold Crap Only. Sued Competitors Often, Strangely Claiming Ownership.
I would say "start searching for another job" :(
____
nico
Nico-Live
Is this an advice column or "News for Nerds, ,stuff that matters"?
First of all double-check the contract with your lawyers. And I don't mean just reading the preamble. Concentrate especially on the parts and the exact phrasing about copyright holders. You need a good copyright law and contract lawyer. A good one may not be cheap but trust me, this is the most important single point of failure, so it pays off to hire an expert. Second of all make sure no one of your current people can be fired no matter what. From my experience this is the most common mistake made by small companies being bought by larger ones. They sign a great contract, everyone is great, until people start getting fired and being replaced by workers of the buying company. Be careful. Be very careful. Remember that they are bigger and you must take care about your own best interest. I wish you good luck. I really hope you will not end up like most of the small companies I have done business with.
Karma: Positive (probably because of superiour intellect)
when i worked for a company that was bought by a larger company, i thought everything was daisies. yay, we were promised more money, large lumps of vacation time, and other assorted goodies, but the day after we were bought, we were laid off. no warning, no apologies, no severance, nothing.
if you're willing to sell your loyalty to someone with the money, make sure you get to keep your job afterwards. that's my advice.
Hear me out. Why do you want to be aquired? Here's what I see: You've developed a small and successful software company, and a larger company wants controlling interest in your company to improve its profits. You can give them that interest without sacrificing your independence, or your profit.
If you're aquired, you become employees of the larger company and will not share in the financial gain the larger company will aquire. Obviously, they see a potential for profit which outweighs cost of aquiring your company and yourselves. Most likely, by aquiring you they'll get something you would NOT give them if you gave them interest in the company and a royalty contract. Exclusive rights to your software and related expertise, most likely.
You can give them stock in your company without giving them your whole company. You can give them voting or non-voting stock, if you want. You can grant exclusive licenses to projects. So, my question is, why do you want to be aquired? Do you want a check with lots of zeros up front? Would you rather administration be handled by division manager instead of someone you have to hire and pay a salary? What are you gaining by merging? You really have to know what you want to gain to know how you should prepare.
My recommendation is to consult (read: pay) a corporate lawyer and corporate accountant (or two) over dinner. If it's administration and book keeping you're after, you can hire administration staff: as stockholders, you're in charge, they do the paperwork, give advice, and ask for direction. If it's a merger you're after, paid counsel is usually the best advice you can get, and they'll teach you how to maximize your returns and maintain control.
I'm as mimsy as the next borogove but your mome raths are completely outgrabe.
The above AC has it right on the money. First, acquiring company is giving us access to a large base of installed clients interested in our application. Furthermore, to answer the parent, we (the quints) do receive a cut of the revenue we bring in from new installations of our software,as such we are not sacrificing all of our sales (and profit) to the mother company. Lastly, the scenario of being fired on day one is trumped since we all have employment contracts of various minimum durations.
I'm into murders and executions, mainly.
Yes, I am an agent of Satan, but my duties are largely ceremonial.
This post is not a solicitation of legal advice
Then I'm sorry but we at Slashdot, being all professional lawyers, are therefore unable to help you. As we pride ourselves on our ability to carefully consider and dispense legal advice, surely you can see that by straying outside our field of expertise we would be doing you a disservice.
If you were asking for legal advice, then I'm sure you would have received 100 replies to your story by now.
Might I direct you to other places worthy or your questions, like kuro5hin?
You are in a twisty maze of processor lines, all alike.
There is a lot of hype here.
Get as much money as you can up front. Cash, not stock, because you have no idea if the company buying you out will be in business next year. Also, if at all possible, negotiate for royalties on the IP you're giving up in the event they decide to lay you and your friends off next week.
It's good to use your head, but not as a battering ram.
I think that was the number we were given when our smallish (1200 people) company was bought out by a big (~7000 people) company. They said they were commitied to making it work, and for the first year it looked that way. Then things went downhill. Slowly management got worse as people left or got transfered. Eventially good talent was brought in, but by then it was too late, the new CEO 6 years latter didn't care about us, and 7 years latter only about 10 people have a job from the old company (some hired after the marger)
To be fair, the new CEO made the right decision, the merger failed, and could not be rescued. The problem was the salespeople had no interest in selling our products, so we had plenty of great products that nobody was buying. The merger failed because one of the benifits (the big company's salespeople had better contacts in industry, and there were mote of them) didn't work out.
In other words, even if everything seems brought now, keep yoru resume up to date, the things that make a merger fail are the same as any engeriing product: management or sales. I've seen many cases of a baddly engineered product doing well, while the compitition that is better built fails in the market.
I worked for a company that was acquired by IBM.
Before the buy-out, I worked, not in an office, because there was no door, but it was in a dead-end, quite cul-de-sac of a quirky office suite.
Post-IBM, we got moved to a building roughly approximating an airplane hangar, scores of people in cubes, no privacy, no way to concentrate.
Everytime a salesman made a particular type of sale (I guess it was a high-end sale) they would ding a bell over a loudspeaker, and everyone would pop up like prarie gophers, trying to figure out what was going on. This would happen several times a week.
I guess what was going on is that big companies are short on creative talent - they don't understand it, and they don't respect anything except new sales BS. To them, we were just a bunch of trolls, mental factory-workers.
Plus, they had us working with a totally different, very bad, set of tools.
It might work out. Really. Two hundred is still a small company.
But, if it doesn't make sure you have a big, fat golden parachute waiting to make the landing softer.
Be sure you know exactly why they are buying you out. Does it really make sense? By that I mean do the acquirers know what they're doing?
When the (under 10 employees) company I was working for was acquired, the owner's response was a succinct "These guys are idiots. If I could raise that kind of money I'd start my own company." He realized he was being offered a good deal and took the money and ran. The rest of us didn't make out quite so well! He was right: they had no knowledge of the business, ignored the advice of all the employees who had been there for years and ran the company into the ground.
A common request when these things happen is that you're asked to sign an employment contract so they know the important talent just won't quit. Don't bother! If you're that valuable, they're not likely to fire you anyway and the contract is unlikely to offer you anything you need. Request an immediate raise and if it isn't offered, start looking elsewhere. Not treasury stock, not stock options -- cash!!
One thing I learned from the experience is just how easy it is to take a profitable, smoothly run company and start hemorrhaging money from every orifice within months.
If the business takes a direction that doesn't make sense, ask for an explanation. If one isn't forthcoming, start looking elsewhere. The place you may have enjoyed working for can do a 180 within weeks.
They have no idea of what your actual physical assets are. Oh, the might have a general idea - X workstations, Y servers, a switch, some monitors. This is the perfect opportunity for moving some things home, like:
desktop KVMs
4 and 8 port switches
your 'company purchased' cable modem
the portable CDRW drive
etc.
Line your pockets, let the Man buy stuff once you've been acquired!
I want to delete my account but Slashdot doesn't allow it.
Sounds like you've already made your move. Why ask anyone here what they'd do differently if you've already done it?
-B
Ash and Hickory, straight-grained and true, make excellent bludgeons, dandy for the cudgeling of vegetarians.
We are a small (5 man) specialized software company which is merging with a larger (200+ employee) company. Basically they are buying us to add a whole new product line and have us be their development skunkworks.
It sound like Pyra Labs/Blogger people have got to Google and are now getting bullied in the corridors! Do not ask us for advice, wimps!
-- Dr. Fu Ling-Yu, Internal Technology Consult; Tongji University, People Republic of China.
I worked for a small internet startup, around 40 employees or so. We were purchased by a large media corporation, which seemed cool at the time, we all got nice stock options, several people were made millionaires, and they said nothing would change because their main office was in another part of the country and they would basically leave us alone.
Shortly after, we had an HR department run by Nazis. Managers were hired that fit more into the "corporate" world. The fun plug was pulled on just about everything. Free soda and snacks went away, happy hour paid for by the company went away. People were forced to adhere to strict hours, even if they were stuck at work until 4am the night before. Our benefits got worse. It basically turned into the movie Office Space. Very sad, it used to be a great place to work.
All of the really smart people got fed up and left. If they were replaced, they got replaced by stupid people for less money. The corporate mantra fucked that place up. The little things made people happy and productive and it was all yanked. Instead of wanting to come into work in the morning and have the pleasure of solving complex problem with a group of very smart people, everyone started to dread coming into work, the smart people left, and then it just went downhill. The company is still around, but the people still there all tell me that are looking to leave.
If they send a permanent HR person to your office and instigate "form hell" on you, run away as fast as you can. It's HR that ultimately screwed that place up.
You should acquire your own company. Then you can report that, overnight, your revenue has doubled. A very simple accounter manuever that will increase the value of your company. THEN sell it.
Bad news.
Sunday July 13, @09:43AM [ Add Friend | 5 Comments | #39217 ]
I have some very bad news. I might not be able to post on Slashdot for some time. I am terribly sorry, but I am afraid it is inevitable. Unfortunately I cannot tell you any more details right now. I am sorry.
One would think someone from mensa would know better than to open their mouths about something like that and renege barely 1 hour later.
But, worse than that, normally one qualifies a statement that goes against all known science with some facts:
I will never write on Slashdot
Saturday June 28, @06:29PM [ Add Friend | 9 Comments | #37758 ]
I will never write on Slashdot after using marijuana, the deadliest of drugs known to human kind. That is because I never use any drugs, especially the deadliest ones. No one should. I like my brain working with the full capacity, thank you.
Yes, because pound per pound, cyanide is just non-toxic play-doh compared to that evil MJ.
My favourite OS is GNU (especially Debian distribution). My favourite IDS is Snort. I am a proud member of MENSA. I hate sexiest men, who are afraid of intelligent women.
I engrish you good, too! I hate sexiest men also, but for intelligent not women. Because competition!!!!!!! Let's engrish with me! Do!!!! it NOW!!!!!
DISCLAIMER: The views expressed hereafter are not necessarily those of MENSA, which I am only a member of.
Agent Bork: Chief! Ya know that guy whose camper they were whackin' off in?
Agent Fleming: Bork, you're a federal agent! You represent the United States Government! Never end a sentence with a preposition.
Agent Bork: Oh, uh... Ya know that guy in whose camper they... I... I mean, that guy off in whose camper they were whacking?
When my company merged with another of a similar size, everyone was excited and motivated. In my contract I was able to sell half my shares on day one.
Spirits were high, so were expectations for the future. We hired an expensive CEO. We hired an expensive marketing guy. We hired an expensive sales weasel.
Then the infighting started. Initially between the Swiss and Australian office. Then between the founders and the CEO. Then pretty much between the entire board of directors, founders, CEO and all of the employees.
With the benefit of hindsight, I should have gotten rid of half of my shares (to guarantee at least some return,) then gambled with the rest.
Never, never underestimate the ability of different cultures and values to screw up a good thing.
Hope for the best, but plan for the worst case.
You ought to be careful about the women you take in to the newer company. From 5+ they now need to wade through 200+. Could get bad for the ones in the 5+ who happen to have a crush on her.
I've been in a couple of merger situations. Though none quite so lopsided.
Be prepared to accept changes in how you work, what you work on, and that you won't be an independent group any more. Some of these changes will be positive, others will be decidedly less so. Only fight the changes that really matter since fighting them all will be futile and frustrating. And, keep in mind that one of the changes may be that you are out on your own again (voluntarily or otherwise).
But, in any case, having the right attitude can really help. Having a positive and helpful attitude will make the difference between being miserable and thriving.
Good luck!
The skunkworks promise bothers me. It may sound cool to do research, but you're effectively taken out of day-to-day operations where you can be cut loose without any short term effects other than the cost savings.
Same thing happened to me and my company a couple years ago (yes, after the dot bomb). We had a promising product (actually a service), but didn't have the funding. We had been a successful small local ISP for 5 years but had done a lot of contract programming too. We knew we had something good going, but couldn't find private financing (2001), so we started talking to a couple complementary companies who were big enough to fund this. We leveraged ourselves quite a bit to get a proof of concept up and running and were within a couple weeks of shutting the doors before one of the companies pulled the trigger and bought us.
Things have worked out great. Everybody is still on board and the product is almost making money (it isn't budgeted to make money until next year so we're ahead of the game), so everybody is happy all around.
It sounds like you've done this already, but for others, pay for the lawyer! We spent quite a bit of money to make sure we had a good lawyer look over the contracts and such. We knew a couple of the higher ups at the buying company, but you can never trust them entirely business wise.
You should also look at getting employment contracts for 2-3 years to ensure that you are still around for a while.
We didn't get rich, but we still have jobs and are still doing the stuff we want to do. All in all, it's worked out great for us. YMMV.
That, plus $2 will get you a nice cup of coffee.
Don't get me wrong, they are truly sincere, just sincerely lying.
On the practical side, don't piss off anyone until you figure out who controls your future in the new business model.
I've been on both sides of this equation, and I can tell you that the other side is a lot more fun. If you play nicely, however, you will be on the better side of the next merger they do and you get to tell the new folks the same line they are telling you now. With some practice, you'll even be able to say it sincerely, not that it actually matters.
Resistance is futile.
You will be assimilated.
200 people is still small enough to retain creativity. Everyone will know everyone and the big-company problems won't have set in.
1) Pre-Nup. Get prearranged severance packages with 6-12 months of salary. That will make them think twice about letting you go.
2) You retain hire/fire power to grow YOUR team.
3) Get a budget that you control.
4) Start looking for another job anyway, because you blew it...
--ee
Antiquated competence won't be a job skill forever.
One of the companies I worked for was acquired by Cisco back in 1998 ( as I recall ) and once with Cisco I was involved with and worked on no less that 5 acquisitions. So I have had my hands in this pretty deep from both sided of the fence.
My advice is that once you are acquired, become a part of that new company. It will make your lives much easier. No one wants to hear "well, when we were so-and-so, we did it this way" over and over again. They may be interested in that if you have something really advantageous, but that will get wrung out pretty quickly.
I have seen acquisitions who fight things all of they way, and eventually they loose out big time vs. the once who say, OK, were part of this new company now. Besides not trying to keep the old identity, this includes such pain in the ass things such as procurement systems and procedures, and other boring things like that.
Now, the new company may want you to keep some things unique, so feel that out early, but when you do make sure you are talking to the right person or persons.
Knowing where you fit in is also a key item! Get your reporting structure down pat ASAP, and if at all possible, make sure you report as high up the chain as possible. Politics are pretty important when you come into a new company. If the current VP of software thought his group was more than up to the task of what the CEO bought you for, then you may be in for a rough ride if you report to that VP.
It's hard to comment more based on what little info I have. If you will be in the same building as the acquiring company you may get sucked into the day to day of what they do now and your "special forces' role could be diminished. Development groups can always seem to use another few hot shot coders when deadlines loom. On the other hand, if you are a remote site it may be hard to get resources, consideration, or even acknowledgment at times. The flip side of both is that if you are local you can attend the meetings, make your opinions hear, and network with the staff, and if you are remote you can be left alone to do what you do best.
A GREAT deal of what's going to happen depends on the acquiring company. If they have made other acquisitions you may want to see how those have come off.
Lots of things can happen.
Oh yes, be careful about talking in the hallways about your new Porsches and Ferraris etc. People who have been slaving at the acquiring company for years to make the mortgage payment really, really don't want to hear about your new yacht, bigger house, etc.
Hope this helps some.
Eschew Obfuscation
All the advice I can offer is to spend some time studying the "culture" of your new company & try to fit yourself into it (or create a niche for your style). If that means things as trivial as dress standards & water cooler slang, do it.
Of course, if conforming means outright prostitution of your principles, I'd say "freshen up the resumé." Either way, make sure you are adequately protected by your contract.
It doesn't sound like your new "parent" is really all that big, so it shouldn't be hard to assimilate into it. And assimilation isn't bad if you become part of something larger & stronger :-)
"Obviously, I'm not an IBM computer any more than I'm an ashtray" (Bob Dylan)
In my case, the purchasing company was bigger and (seemingly) more advanced than we were, and accordingly my initial approach was to bend over backwards to accomodate their requests, integrate with their technology, stay humble, allow that other folks may have solved the usual problems differently/better, give the benefit of the doubt, etc.
What I didn't appreciate at the time is that our organization was productive & successful (in our little niche) because over time we had acquired certain skills and chosen technologies and approaches that worked for us (and disregarded/discarded those that didn't), and that those were the things that made us an attractive acquisition. "Keeping an open mind" insofar as it entailed questioning or abandoning what had got us to the point of acquisition was therefore a mistake (IMHO).
In other words, do as much as you can to understand why your company was purchased, and try to maintain a "peer-to-peer" attitude with the acquiring company (if appropriate).
I've been through a couple of mergers, and I think the best advice would be "update your resume". Things can get ugly quickly and you want to be prepared.
Actually, I didn't post that one. I thought it was fairly comical though. I figured if I was going to openly attack someone I would have the balls to do it non-AC. When I originally read your journal, I looked at it for about 2 seconds, because I wanted to see what an honest-to-god mensa member had to say. Was not that impressed, but not so unimpressed as to post the LARGE amount the above did. Oh well, you're making friends.
Yes, I am an agent of Satan, but my duties are largely ceremonial.
...find out who brings the donuts.
No.
The exact thing happend to me about 5 years ago. 10 person company bought by a 150 person company to get into a new market.
The merger went poorly. The exec team of the larger company was good at "doing deals" but did not understand the new market nor did them understand technical integration. They decided we needed an full re-write to have tighter integration. The new technology sucked (the original wans't great either FWIW) and it set us back a year in terms of features.
The new market was potentially MUCH larget than the old and had a lot more competition. The Management was simply out of thier league.
Make sure you understand what thier plans are for the product. Make them lay them out in detail and make contractual agreements with penalties for not following these plans (e.g. a magor re-architecture within the first 18 months means accellerated vesting).
Its importtant the the new sales team understands where things are going too. Because of the re-write the sales team failed to learn anything about the new market. When the new version came out the sales guys didn't know the first thing.
Stop posting off-topic remarks. I advise everyone who hates Mensa Babe to post their grievances in her journal.
Mensa Babe,
Please make a FAQ to address their grievances and post that to your journal. Here's the grievances I've noticed so far:
1. Superior is misspelled.
2. Many of your posts are trolls.
3. You are probably not a member of Mensa.
bless you.