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?"

Comments

This is silly

[fm6]

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!

Be an anthropologist

[Anonymous Coward]

Study the culture of the acquiring company. Find out what's really important to them and how they expect to do things. Otherwise their immune system may surround, scorch and eat you before expelling you. You're outnumbered 40 to 1. You'll have to adapt.

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.

Re:Be an anthropologist

[MarkusQ]

Don't just study them. Join them. Make a point of meeting people in the company, learning about the other products, customers, etc. Be friendly with everyone--the first person you get to know may turn out to be a great ally or they may turn out to be the universally lothed office jerk--so don't "choose sides" until you've been there a while. In short, act like a new hire rather than a member of an organ transplant just waiting for the T-cells to show up.

-- MarkusQ

Well...

[nsebban]

I would say "start searching for another job" :(

Here is what you have to do.

[Mensa Babe]

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.

Re:Here is what you have to do.

[NexusTw1n]

I've been outsourced twice, neither was a great experience, although the first experience, where I was "sold" to IBM at least offered better pay cheques.

The only thing I would do differently is not believe the "nice and agreeable" contract. There will be a loophole your, or their lawyers missed, it will cause problems and bitterness. Accept it will happen and plan accordingly.

Generally speaking I wouldn't recommend mergers, if you have a good product sell it to the company on an exclusive for x years contract. Don't sell the talent, it rarely works out smoothly or for the best.

The second time the company I worked for was sold, I learnt some crucial advice for the CEO. Don't say you're going to be there and support the team you built from scratch throughout the whole transition period, and then 4 days later quit, take the massive cash offer and disappear to a golf course for the rest of your life.
The people you leave behind tend to get paranoid and start looking for new jobs before you hire your first caddy...

prepare

[Naikrovek]

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.

Why be aquired?

[DarkVein]

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.

Sorry

[ColaMan]

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?