Being acquired can be the fulfillment of a dream — or the start of a nightmare. Here’s how to make sure you get what you want.
6 min read
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I've worked at a variety of businesses that focused on acquisitions, and I helped launch Marcus by Goldman Sachs, where in the past two years, we have acquired three separate companies and incorporated them into our business and our culture. Throughout my career I've seen the dreams of entrepreneurs come to life in the most gratifying ways — if the acquiring company does it right.
It's a big "if." Acquiring a startup comes with a boatload of challenges. Companies that succeed in scaling the startups they acquire have certain things in common: They know how to manage the cultural issues, they provide the right resources and guidance, and at the same time, protect the startup's mission and champion it within the larger firm.
How can a startup know a good acquisition offer from a bad? The right fit from the wrong? The opportunity of a lifetime from a decision you'll regret?
Here are five ways to tell if an offer to sell — and the company that makes it — are right for you.
1. Is the buyer enthusiastic from the top down?
The 49ers who found the gold in your startup and are sponsoring you surely understand you and your team's value. But what about their bosses? The excitement about acquiring your company should go all the way to the top.
Once you're past the first calls and introductions, look for signs of how deep the acquiring company's enthusiasm really is. When they visit you and your team, if the passion is there, they'll stay longer than expected. Their top people will show up and they won't be on their phones. Meetings will turn naturally into dinners.
Similarly, when you visit them, their top people won't be hidden away in their offices, but out on the floor, talking with their teams. Their senior people will be the ones doing the white boarding. The operating floors will be pumped and buzzing. These are the signs of a culture that's open to — and excited to be — working with a startup.
2. Do you know what you're walking into?
In the run-up to being acquired, look for ways to sync with the larger organization. Your sponsors should be walking you floor to floor, introducing you to people in departments beyond your immediate points of entry. The more broadly you can interact, the more the veil of "visiting in-laws" — all form, little function — will lift. If the fit is right, you'll see opportunities to evolve within the organization, and more ways to pick up workflows and responsibilities.
Connecting with people beyond your immediate sponsors is key to gauging your ability to scale. Large companies can be ideal partners for startups for that very reason – access to the tools and people you'll need for scale.
The resources you'll require won't be concentrated in any one place. Look for senior people throughout the firm who are natural coaches, who enjoy talking with you about their company's learning environment. You'll need as many of these allies as possible to unlock your full potential.
3. Do they care about your people?
Chances are you've doubled as your own HR department. Now you'll be working with HR professionals. They're among your most important resources.
Connect with HR as much as possible before you sign. Don't be apologetic about it. You have equity — you're being brought in to help advance the culture. At the same time, know that others have come before you. They've built a good business, one that you'll need to respect, and pay homage to. Be clear that you know it's a collaboration.
Working closely with HR can expose red flags on the front end and lay critical groundwork for future integration. Remember that you might be bringing your whole crew with you, so be sure HR understands the value of each of your team, and why each member is special. You're the one who knows the "inner unicorn" in all your hand-picked people; others will need your help to see their greatness too.
4. Do they have a plan for merging team members?
An acquiring company that's truly friendly to you will invest more than capital — they'll often make sure a rising star or two joins your team. Who those stars are should be made clear early on. You should meet them before you sign. When you do, they should be well into the process of considering a new career direction, and excited to discuss the opportunity with you.
Top talent that's ready to jump to your team is a clear indicator that the acquiring organization isn't calcified, but adaptable. Companies that are calcified have immune systems that eventually will fight your startup DNA, protect their assets and keep you on the sidelines. Your best partner is an organization that builds communities and shares its assets, as you'll be sharing yours.
5. Does it feel right?
Going from being your own sun to becoming part of a much larger universe is hard. Many things will be different. If you're acquired by a bank, you may have to wear a suit some days. You may need to drop Gmail and start using Outlook. Are these deal breakers?
Changes in your comfort zone may be difficult, but they're not necessarily worth walking away for. Don't stress the small stuff. What's important is how people behave. Look for signs of senior people treating juniors with respect, whether colleagues say "please" and "thank you," the small mores that reveal an organization's larger truths. If you've found a company that cares about you, and not just your product, that will go a long way to smoothing the inevitable bumps and bruises.
Most important, keep in mind what matters most to you and your team. Just because an offer is great on paper doesn't make it right. Take the time to get to know the company you'll be joining, and make sure it's a relationship you and your business are interested in for the long term.