Answer by Mark Rogowsky, Uber communications, on Quora

A few things are worth mentioning:

  • Sometimes the “credible threat” isn’t that the larger company will actually directly replicate what you are doing, but rather buy someone else instead of you. And then the bought company will replicate your business, or close enough that your greenfield opportunity now looks like already plowed territory. Cisco used to run an M&A game where they found two targets in a field and told Target #1 “it’s you or the other guy, we prefer you, but if not you, then them and them + us = you becoming a footnote.”
  • A bird in hand is worth three in the bush. If you sell now, you get some kind of guaranteed return, hopefully some sort of commitment to your people and — it sounds like — a place you’d be happy to work for awhile. That’s not for nothing, even though you’re given up a lot (independence, your potential future growth, etc.)
  • You might be able to negotiate an earnout beyond the “respectable” offer, especially if your product can be directly measured post-acquisition. For example, you’ll take the deal at 10x the run rate, but “If your product grows by x% over the next 3 years, you’ll also get another 5x, proportional to that growth.” It gives you more skin in the game (you like), more reason to stay (they like), and takes away some of the sense you left too much on the table by selling now.
  • They aren’t the only people who can hurt you or your growth prospects. Maybe you are Dropbox (which looked like it might be a “feature” but has managed to show it’s a likely billion-dollar company despite the competition) but probably you aren’t. The more successful you are the more competitors you might face and the greater chance you might not have a terrific outcome down the road.

This isn’t to say, “Of course you should sell.” There is much to weigh, including how well equipped you are financially to do battle, how well you are acquiring new talent, how much of a lead you think you have, and how badly you want to stay independent.

I leave you with the words of the great American financier Bernard Baruch: “I made my money by selling too soon.”

What should you do if a large competitor says, “Sell to us or we’ll crush you?”: originally appeared on Quora: The best answer to any question. Ask a question, get a great answer. Learn from experts and access insider knowledge. You can follow Quora on Twitter, Facebook, and Google+. More questions:

 

Published on: Aug 12, 2015