Getting acquired is the dream of any tech company. The CEO of any company would love to take a few billion dollars' home with them. In the case of a unicorn company, they may even become a billionaire without generating a single sale. It may seem like the perfect end to a business, but things don't always work out this way.
But getting acquired isn't all hugs and kisses, and this article is going to show you why.
What Actually Happens?
So what actually happens with mergers and acquisitions?
If you have accepted an offer for your company to be acquired, it may go one of two ways. You may simply step away from the company, take your money, and ride off into the sunset. In a lot of cases, part of the agreement is that the founder continues to manage a department or maintains a position on the board.
These arrangements can be incredibly complicated, so before accepting an acquisition offer you have to carefully read the terms and conditions of the contract presented to you.
When You Must Work for the Company
It's not uncommon for the founder of the company to continue to work for said company. This time they may be in the position of an employee or they may simply be operating with a reduced minority stake. It's at this point where the dream scenario so often becomes a nightmare.
Unfortunately, people in this scenario tend to be less passionate about what they're doing because they are no longer doing it themselves. They are doing it for someone else, and this may be part of the reason why they left traditional employment in the first place.
Not as Much as You Think
A common misconception is that when someone sells a company to someone else the founder of that company gain all the money. This isn't the case because it has to be split between the various shareholders. Since a lot of startups that are bought get off the ground through venture capitalist funding, this means that their stake has already been diluted. The amount of money they get may be half of what's on the table, or sometimes less.
And during acquisition if the founder maintains a stake in the company they are only going to get whatever they can sell their shares for. The money that's on the table isn't actually as great as the headlines tend to make out. You are selling the company not the individual.
For example, Blackberry recently acquired Good Technology for $425 million. But much of this money has gone to the shareholders not the founders, who own a small portion of the company collectively.
As part of an acquisition, you are losing out on control of the product you created. It's no longer yours to do what you like with. For most entrepreneurs, it's incredibly difficult to see this happen to a product that you once desired. It's a sad scenario that many entrepreneurs can't cope with.
In the best case scenario, the product goes on to become a major success story. But in many cases the product goes south and it becomes something else or it's simply left at the side of the road.
Think about how the co-founder of Facebook Eduardo Saverin must feel now. He was forced out of Facebook by Mark Zuckerberg, and although this matter was later settled for an undisclosed sum outside of court, his once-in-a-lifetime creation is no longer under his control and he has no say in it.
Does the Company Treat You Well?
Simply because someone with a lot of money has placed money on the table doesn't mean that they are going to treat you right should you accept. There have been countless situations where the founder, who now owns a reduced stake, has been left out of key conversations and marginalized by the firm acquiring them.
And they can't do anything about it because they lack the voting power in order to make their opinions heard. This can be extremely frustrating and it can cause a lot of conflict with the company going forward.
Conclusion--Think About It
Always think about whether you want to get your company acquired carefully. It doesn't matter how much money is involved because if things go wrong when it happens there's no going back. This is a chance you will likely only get once in your life, so you have to know when to sell your business.
What are your views on acquisitions and mergers?