Increasingly, they are also used as “acqui-hires.” In an acqui-hire, the acquirer is not only interested in obtaining the technology, patents, products and customers, but also in hiring the talent of the team being acquired. There is a huge fight taking place among the leading tech companies to acquire and retain talent. Facebook leads the pack with a 75% founder retention rate, while Google, Yahoo and Apple have around 65% retention. Golden handcuffs – such as a staying bonus, restricted stock, or vesting period – are often used to ensure that top talent being acquired stays with the company. (Luckerson) Acquisition value is enhanced by many factors, including the quality of the relationship between the acquirer and acquiree, the strategic fit between products and technology, the value of the intellectual property and/or patent portfolio, and the quality and quantity of the human capital being acquired. Finally, like all market values, having more acquirers competing will increase the acquisition price. So proactively selling your company is better than waiting for one single acquirer to come knocking at your door. Companies Are Sold, Not Bought They should hire an M&A (mergers and acquisitions) advisory firm and start proactively selling the company 6–18 months before the desired exit. Up to half of the total valuation obtained by the company can come as a direct result of the exit strategy and its execution. – Basil Peters , CEO, Strategic Exits Corp Getting the company acquired follows a certain process. First, you need to ensure the company has prepared its selling documentation and that its corporate structure and due diligence binder are in order. Next, you contact from 50 to 100 prospects, narrow this down to a number between perhaps 10 and 20, then select a short list of bidders. The third phase is the bidding process, whereby you try to negotiate the best deal. Peters explains what happens if you miss the window of opportunity: “Large companies have smart executives with lots of cash. They often all decide at the same time to acquire a company in a specific space. They start to look at most companies in the field, and you need to be one of them. The big company’s competitors notice this and start a cascading wave of acquisitions. Once the wave is over, almost overnight all buyer interest stops. But that’s not the worst news. After the wave, those not bought find themselves competing with very large, very well-funded companies, with highly effective brands. These giants now start to kill the smaller companies, that did not get acquired.” (Basil Peters, NACO Academy Module 108) Your Goal Is to Be Disruptive! In both the market and the exit, it is important for the Angel to understand who the entrepreneur is disrupting with their business. If they are not really disrupting anyone, the Angel needs to ask why: Why am I investing? If I am not disrupting a competitor, then why is the market going to need my solution? Why will a larger entity need to buy the company to get a competitive advantage or eliminate my disruption in the market? — Kirk Hamilton , Angel Investor & Principal, Élan Tactical Management Inc.
83 A Practical Guide to Angel Investing: How to Achieve Good Returns
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