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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
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.
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.
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.
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.
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.
Resistance is futile.
You will be assimilated.