[HN Gopher] What I learned selling my company
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What I learned selling my company
Author : hglaser
Score : 71 points
Date : 2024-01-12 23:24 UTC (1 days ago)
(HTM) web link (www.harryglaser.com)
(TXT) w3m dump (www.harryglaser.com)
| mbesto wrote:
| Work in M&A. Have been involved in 500+ M&A deals and also sold a
| company. These are very good insights!
| kwerk wrote:
| Great validation. What (maybe more nuanced) insights would you
| add?
| stagger87 wrote:
| Can anyone explain the statement "most M&A fails"? In what way?
|
| Edit: Nvm, I found some sources for this claim.
| thenerdhead wrote:
| In many ways. Like adjusting to the new company's culture. In
| staying the relevant length to exercise options. In producing
| at a similar caliber prior to acquisition. The list goes on and
| on.
| ozim wrote:
| It is there in the paragraph: failed integration, a ton of
| employee churn, and/or a series of missed targets.
| gumby wrote:
| > M&A is one of two ways a pot of gold happens.
|
| I don't know what the second one he has in mind is; the some of
| the ones I know are:
|
| 1 - operate a profitable business that throws off a ton of cash
| (these can be huge, like Koch, Cargill, Aldi, and can make long
| term employees extremely, and privately, rich).
|
| 2 - sell part of your company to the public (IPO)
|
| 3 - sell the whole company (M&A)
|
| 4 - spin out or sell off a division (a kind of M&A)
|
| One major disadvantage of 2-4 is that other people tend to hear
| about it.
| fairity wrote:
| > One major disadvantage of 2-4 is that other people tend to
| hear about it
|
| I don't doubt this, but I'm curious: why do you see the
| publicity as a disadvantage?
| throwup238 wrote:
| A parasite's best chance of survival is to avoid discovery.
| gumby wrote:
| Running a profitable business with happy customers is
| parasitical? I thought that was for PE and hedge fund
| clowns.
| gumby wrote:
| Why on earth would you _want_ to let someone know that you
| had a big payout? It 's none of anybody else's business how
| much money I have and if nobody knows you can walk downtown
| in peace, go to restaurants, hang out with your same friends,
| and still have lovely ski or yacht holidays in peace.
|
| The Bay Area and Seattle have quite a few "unknown"
| billionares. For example if you had less than 5% of Microsoft
| when it IPOd you were not listed in the S-1, and if you hung
| on by the mid 90s you could have been worth 8-9 figures.
| mjr00 wrote:
| The second one the author had in mind is almost certainly IPO.
|
| Your (1) isn't a pot of gold in the colloquial sense of
| "suddenly finding a life-changing amount of money". Running a
| profitable business is ideal, especially in a post-ZIRP world,
| but it almost never culminates in a single "all my hard work
| has paid off, I can take it easy now" moment like IPO or
| acquisition.
| gumby wrote:
| > Running a profitable business is ideal, especially in a
| post-ZIRP world, but it almost never culminates in a single
| "all my hard work has paid off, I can take it easy now"
| moment
|
| That first time you pay yourself $20MM sure feels like that,
| and repurchasing from your employees or paying out large
| bonuses sure can for them too.
|
| > like IPO or acquisition.
|
| Have you been through either? "Take it easy now" is the
| opposite of what happens in an IPO -- you're now subject to
| the scrutiny of the financial press, SEC, and random
| shareholders when before you could send monthly updates to
| your board. And unless you avoided an earn-out in your
| acquisition, the slog just continues.
| cj wrote:
| > 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 because you
| got an offer with a 50% chance of actually closing 3 months
| later.
|
| Even worse, most acquirers will say "nope" if you ask them to
| cover your legal fees if they back out of the deal.
|
| This happens because sellers of companies only sell 1 or 2
| companies in their lifetime, while buyers of companies typically
| do dozens and dozens of transactions. There's an extreme power
| imbalance in favor of acquirers. Most sellers learn these lessons
| the hard way.
| aidos wrote:
| Not to diminish your point, but you've described the UK housing
| market where that's exactly how it works.
| heads wrote:
| > _Deciders on M &A [do] not include the VP corp dev or the corp
| dev managers. Those are good relationships to have, but they
| don't initiate large offers._
|
| What is corp dev's role then?
|
| Maybe they like an in house recruiter: they conduct negotiations
| and ease the process by meeting with both parties, but the
| yay/nay decisions are made by the hiring manager?
| caseysoftware wrote:
| No, they're less recruiters or negotiators and more as scouts.
|
| They are supposed to go out and find interesting things in (or
| adjacent to) your space, get to know them, understand how they
| measure up among their peers and competitors, and bring all
| that information back to the company.
|
| They're all waiting for the company - usually the CEO, CPO, or
| CRO - to say something like "we have a need for X."
|
| Background: I was at Okta through the Stormpath, Azuqua, and
| Auth0 acquisitions. I didn't have a role in any beyond knowing
| the M&A team and observing it throughout.
| lhh wrote:
| All great points!
|
| If anyone is interested in how things tend to work if you're
| trying to proactively sell a company (especially a profitable
| one), I put together a write up a while back:
| https://www.fivecastfinancial.com/guides/how-selling-a-compa...
|
| (I used to be an M&A advisor - no longer!)
| bmitc wrote:
| > People often get into startups because of the chance for a pot
| of gold at the end of the rainbow.
|
| At least someone's finally honest about it. Startup culture is in
| general a blight.
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