Your Startup Was Acquired. Now What?
I'd be willing to bet getting acquired is something nearly every startup CEO has thought about. But what about life as a post-acquisition CEO? Business founders: It's time to put this potential role on your radar.
As a serial entrepreneur, I'll admit that staying on as CEO after an acquisition requires a lot of thought--and it's something on which I've yet to come to a final decision. To gather some perspective and insight, I reached out two CEOs whose companies were acquired.
The first is a CEO who stayed in his role after an acquisition--Neil Mody, co-founder and CEO of nRelate, a company that makes online publishing tools. Mody and co-founder Oliver Wellington founded nRelate with a small angel funding round ($500K) sold the company to Ask.com in 2012.
For another perspective, I spoke to Rahim Fazal, co-founder and former CEO of social media marketing company Involver. After Oracle acquired his company, Fazal integrated from CEO of Involver to serving as an executive at Oracle, where he's responsible for product strategy in the Social Cloud.
Even if you're not in talks for an acquisition now, it's not too early to consider your options, so you're not left asking yourself, "Now what?" as soon as the ink dries. Here is some advice from post-acquisition experts:
1. Never count your eggs before they hatch.
For those of you who are currently in talks to be acquired--or at least hoping to be--Mody makes a great point to remember: Talk is cheap. You should never take anyone seriously until you get a letter of intent. And don't make acquisition the top priority of your company until you're well into the home stretch of the deal. As a CEO, the most important thing you can do is focus on building your business as normal and not diverting too many resources unnecessarily.
2. You will not be acquired if you're living under a rock.
When it comes to getting a potential acquirer's attention, Fazal says it's the CEO's job to make sure the right people in the ecosystem are talking about you. That means big company executives, industry press, influential investors and analysts, and service providers.
You want to make sure people are saying the right thing. What's the right thing? That's up to you to decide. Generally, it's some measure of growth, differentiation in the marketplace, and positioning that is simple to understand, easy to pass along, and conveys momentum.
3. Relationship development is a must before you exit.
To ensure all parties are going to work together as efficiently as possible, you should take all parties (your business divisions, the external bank if you're using one, your accounting and legal team) out to dinner, Mody says. Rather than having the first meeting take place over a 100-page legal document, save time and energy by building relationships before papers are signed.
4. Staying on post-acquisition may come down to your long-term vision.
Mody stayed on as CEO of nRelate after the acquisition because he felt there was still much more in front of the company. This is why it's important to find a company that shares your long-term vision: so you can be comfortable staying on as CEO if the opportunity is there.
Fazal had similar feelings when Oracle acquired Involved. He says seeing his vision become reality by teaming up with an industry leader and playing a bigger role in his customer's businesses inspired him to keep an executive role. He also wanted to learn what it's like to work inside a larger company.
5. Be deliberate about how you design your post-acquisition plan.
Fazal explains that there are a lot of questions to ask to ensure things run smoothly for post-acquisition life. For instance: What roles do you and your team want to play day-to-day? How do you want your company to be seen inside and outside the acquiring company?
Answering these types of questions before signing helps build a solid game plan going into the acquisition. This increases your chances of making sure the deal is successful, and your team members are happy and taken care of.
6. Passing on the control of your company is scary, but involves trust.
In some ways, as you scale a business, it's typical to give up a lot of control well before acquisition, either to VCs or external investors. Fazal says, if you don't want to give up exclusive control, don't sell.
Remember, unless you're self-funded and the sole owner, you've already given up exclusive control. Mody notes that in many ways, CEOs may be used to dealing with this fear to a certain extent. But getting acquired evokes a new level of fear. Weigh the pros and cons, and balance the fear against the promise of taking your company to a place that you couldn't reach on your own.
7. There are still lessons to be learned post acquisition.
A big lesson Mody learned was not to underestimate the time that goes into parent company necessities post-acquisition, such as long-term forecasting. There are of course many benefits, but significant time needs to be spent on corporate processes, and you should be prepared for this reality if your company is acquired.
Fazal begs CEOs in the same situation not to take things too seriously. One of his most helpful mentors reminds him every time they see each other, "As a CEO, you do the best you can at the current point in time." Be fair to yourself. You can only judge your decisions based on the information you had at that point in time.
Would you want to stay on as CEO post acquisition?