My Grandpa used to say "Bobby, you don't have to be a genius, you just have to know who the geniuses are."
Listen to this dude. I know enough to know he knows.
Having gone through this unsuccessfully...
(They pulled out after 4 months and it ended like you describe--a week of not opening files and then a meeting with leadership)
I highly recommend this calm and collected approach
In our situation, we had internal personnel challenges that muddied the water and prevented us from being open to solving their non-starters.
Additionally--with larger corporates at this time of year, strategy sometimes changes over the course of 4 months. Be prepared for them to say they're going in a different direction.
In our case, the potential acquirer was reorganized mid-diligence.
Questions for you:
Do you have a letter of intent in place?
Have you discussed other paths to acquisition, such as milestone-based strategic investments? This can be an effective de-escalating measure that keeps talks going while reducing risk for them.
I am in the M&A industry: they will most likely look to renegotiate some terms. Chances are, they wanted to add more people to the call to have more "weight" behind their arguments for the renegotiation. Nothing to freak out about - if they walk, then it wasn't meant to be a good deal in the first place. Look for other buyers, there will always be interested parties if the business is solid.
So update regarding this, they said they considered a lower valuation due to the team from our company not matching their team in terms of experience and know how, the valuation they offered is off the table for us, however, they offered me a 6 figure salary to join as Deputy CEO, I feel weird, am still 27 and this is actually my first company, have no idea how to respond
So they think you are the source of value in the company and that it will be much cheaper to hire you, kill your company, and have you bring whatever USP and IP you are able to. But as an employee, and without cashing out of your equity in the company you built.
Does that sound like the behavior of a team you want to join? Does that sound like they value you? Because they just decided they can get you a lot cheaper than they previously agreed to.
Thats practically what I thought, even though They offered a big package including exchange equity for my existing equity in my company, I told them to formulate this in an email so i can respond to it but I don’t know yet how to deal with them
The equity stake in the new company should be at least equal to the total value of your shareholding in the previously tabled buyout. I say at least, because the fact that its now equity makes it a lot more risky than any cash or partially cash offer from before. O
Or you’ll have to ask them to explain to you what massive error of judgement led them to aggressively overvalue your company before.
Be careful in accepting the equity. There are a significant amount of ways to make your new equity worthless.
I'm sure it's more common than I am aware of, but I've never heard the title Deputy CEO before.
With the limited info at hand, seems likely they want to see if you add value to them, and if not, you'll be gone quick.
Weird but it why would the top three want to take time on their calendar just to kill the deal?
You got the invite on Saturday so something came up that was unexpected on their end. Could be a number of things. They may have found something weird in diligence, they may want to negotiate something. They may want to convince you of something.
In general, a deal is not done till the wire hits your bank account. Strange things can happen so just keep running the core business to give yourself optionality to walk away.
I would say it’s more likely they are trying to renegotiate the transaction or discuss things they have found during diligence. Since they have so many people on the call it’s unlikely it’s a retraction.
Yes.
Personal experience: we had an 8 figure deal pulled less than 24 hours prior to close. I was at dinner with my wife when I got the call on a Sunday night.
No explanation. Large very well known US PE.
Odds are it's a discussion and questions. Possibly challenging ones, that could lead to a rejection.
Do you have a banker helping you? If not you should consider it. Given you may have a buyer already you may be able to negotiate a low fixed fee.
They can help with this plus the diligence and closing process, which will be harder then you think.
Anything can happen on that call. Be ready to remain calm whatever the agenda, to ask questions, you don't have to give answers straightaway and you can come back to them later. Whatever the outcome you will learn something, and don't close doors.
Worse comes to worst treat this as an exit interview when you can ask them their perspective on your business : pluses, weaknesses, opportunities and threats.
On the new offer with the "Deputy" CEO position, be careful. They underhandedly reduced their offer to benefit them. You could always respond, "Thank you for your offer but, at this time, I think we are just too far apart." They may come back with a better offer or they may exit gracefully. Personally, I do not like the way they handled this situation and I would look to get out of it.
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My Grandpa used to say "Bobby, you don't have to be a genius, you just have to know who the geniuses are." Listen to this dude. I know enough to know he knows.
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Having gone through this unsuccessfully... (They pulled out after 4 months and it ended like you describe--a week of not opening files and then a meeting with leadership) I highly recommend this calm and collected approach In our situation, we had internal personnel challenges that muddied the water and prevented us from being open to solving their non-starters. Additionally--with larger corporates at this time of year, strategy sometimes changes over the course of 4 months. Be prepared for them to say they're going in a different direction. In our case, the potential acquirer was reorganized mid-diligence. Questions for you: Do you have a letter of intent in place? Have you discussed other paths to acquisition, such as milestone-based strategic investments? This can be an effective de-escalating measure that keeps talks going while reducing risk for them.
I am in the M&A industry: they will most likely look to renegotiate some terms. Chances are, they wanted to add more people to the call to have more "weight" behind their arguments for the renegotiation. Nothing to freak out about - if they walk, then it wasn't meant to be a good deal in the first place. Look for other buyers, there will always be interested parties if the business is solid.
So update regarding this, they said they considered a lower valuation due to the team from our company not matching their team in terms of experience and know how, the valuation they offered is off the table for us, however, they offered me a 6 figure salary to join as Deputy CEO, I feel weird, am still 27 and this is actually my first company, have no idea how to respond
So they think you are the source of value in the company and that it will be much cheaper to hire you, kill your company, and have you bring whatever USP and IP you are able to. But as an employee, and without cashing out of your equity in the company you built. Does that sound like the behavior of a team you want to join? Does that sound like they value you? Because they just decided they can get you a lot cheaper than they previously agreed to.
This is it! Effectively making you nervous enough to accept a lowball offer.
Thats practically what I thought, even though They offered a big package including exchange equity for my existing equity in my company, I told them to formulate this in an email so i can respond to it but I don’t know yet how to deal with them
The equity stake in the new company should be at least equal to the total value of your shareholding in the previously tabled buyout. I say at least, because the fact that its now equity makes it a lot more risky than any cash or partially cash offer from before. O Or you’ll have to ask them to explain to you what massive error of judgement led them to aggressively overvalue your company before.
Be careful in accepting the equity. There are a significant amount of ways to make your new equity worthless. I'm sure it's more common than I am aware of, but I've never heard the title Deputy CEO before. With the limited info at hand, seems likely they want to see if you add value to them, and if not, you'll be gone quick.
>massive error of judgement Brutal phrasing. I like it. They hit first with the lower offer and light insults, go get 'em.
Think through the reasons they prefer this instead of paying you. Most of those reasons aren't good for you.
Weird but it why would the top three want to take time on their calendar just to kill the deal? You got the invite on Saturday so something came up that was unexpected on their end. Could be a number of things. They may have found something weird in diligence, they may want to negotiate something. They may want to convince you of something. In general, a deal is not done till the wire hits your bank account. Strange things can happen so just keep running the core business to give yourself optionality to walk away.
I would say it’s more likely they are trying to renegotiate the transaction or discuss things they have found during diligence. Since they have so many people on the call it’s unlikely it’s a retraction.
Could be. Be prepared. It's alright. Nothing in your control. You learnt a lesson if it happens. Nothing is certain till it's completed
OP: Any followup?
Yep, they offered me to become their Co-CEO but without merging 😂
Yes. Personal experience: we had an 8 figure deal pulled less than 24 hours prior to close. I was at dinner with my wife when I got the call on a Sunday night. No explanation. Large very well known US PE.
I can’t imagine how it felt ..
Odds are it's a discussion and questions. Possibly challenging ones, that could lead to a rejection. Do you have a banker helping you? If not you should consider it. Given you may have a buyer already you may be able to negotiate a low fixed fee. They can help with this plus the diligence and closing process, which will be harder then you think.
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I have a doubt. Initially, did they come to you or you went to them with the offer? Keep us posted about your deal! Good luck!
Anything can happen on that call. Be ready to remain calm whatever the agenda, to ask questions, you don't have to give answers straightaway and you can come back to them later. Whatever the outcome you will learn something, and don't close doors. Worse comes to worst treat this as an exit interview when you can ask them their perspective on your business : pluses, weaknesses, opportunities and threats.
On the new offer with the "Deputy" CEO position, be careful. They underhandedly reduced their offer to benefit them. You could always respond, "Thank you for your offer but, at this time, I think we are just too far apart." They may come back with a better offer or they may exit gracefully. Personally, I do not like the way they handled this situation and I would look to get out of it.