Situation: A company has been approached by a larger company that may be interested in acquiring them. The prospective acquirer is a current customer. Absent an extraordinary offer, the company isn’t interested in selling. Nevertheless, a conversation could be valuable. How much information about the company should the CEO share now? How much do you share with a potential acquirer?
Advice from the CEOs:
- The key term here is potential. At this point, there is no commitment, and you really don’t know the other company’s motivation. As you start this process, don’t share confidential details about your plans or prospects, or your pipeline. Just broad information. If things get serious, slowly open the kimono.
- Make sure that you have an NDA in place covering anything that they ask you to disclose for this possible transaction.
- Given your current situation, a standard offer probably won’t be appealing, so be open to a creative option.
- Decide ahead of time what your price is. If they are in the ball park, keep talking.
- For example, Say you want $XX. Would you be attracted to 50% of that now, 50% later? Under what terms?
- Put a low valve on future payouts, particularly if you are not in a position to call the shots.
- Be open and creative. You never know what can happen. You could sell to them now at the right price. Then, if the acquisition doesn’t work out, buy the company back in 2-3 years at a discount!
- If you get into higher level negotiations, employee retention will be critical. Make provision for this as part of the deal.
- Hire a disinterested professional negotiator you who you can trust.
- If things get serious, bring in an investment broker to assist. It will cost you 5% but they are helpful in the negotiation and could bring in competing suitors to up the ante.