By Miriam Tuerk At the Olliance think tank in Napa this morning, a panel discussed exits gave some anecdotes on how to have a successful exit. The panelists had gone thru more than a dozen open source acquisitions over the last 3 years. They discussed ones that had been successful and ones that weren’t. On the success side: 1. If you are the seller, make sure you understand the motivation of the buyer – why does the buyer want to acquire you? Make sure you understand motivations of your employees – their motivation is key and it is not alway money. 2. Employee retention is key. As an acquirer, make sure you get to know the people and spend time with them. Earn outs are very complicated. 3. When doing an earn out try to ensure that you have defined the earn out in great detail at the term sheet not when you are doing the definitive agreement. 4. Make sure you tell people what their personal comp will be at the beginning of the process so that the team can focus on the transaction and not be distracted by their personal situation. 5. If there are issues that you know will come out during due diligence then disclose them early before the term sheet gets signed – it will affect price and it is better to deal with price at term sheet instead of later in the process. 6. Terms of commercial licenses can be a key item – uncapped IP infringement, for example, can be a big issue. While this used to be standard practice in the software industry, this is no longer acceptable. This can be very costly for the seller and makes the transaction much more complicated. 7. Make sure you do a code scan with someone like Blackduck before you go thru the sale process. 8. On the topic of retaining a banker, a banker is good if you need help on the negotiation. However, other than that transactions of any size can be done with or without a banker. |