I was speaking with a CEO today who is considering merging or selling his business. I spent some time asking him why he wanted to sell and what he wanted his life to look like on the other side of the deal. It was an interesting conversation. I told him about my experience selling GameDaily to Time Warner /AOL and the 3 near death make that 4 near death experiences we had getting the deal done.
I met Norm Brodsky at the Inc500 conference in DC this past September and he had a bunch of stories to tell. He’s the “Street Smarts” columnist for Inc Magazine and he has put together a succinct story about the bumps of an acquisition in this article about The Rule of 3.
My experience doing a deal with the world’s largest media company Time Warner, was at the same time exciting, heart stopping, frustrating, challenging and an awesome learning experience. We had hired a hot shot New York investment bank to help us on a previous deal (which, by the way, they botched and we dismissed them) and I had promised myself that if I ever were going to sell my business, I’d do it alone or not at all. The good thing about our fired banker was he gave me the story of the “3 near death experiences” that every deal goes through.
At the outset, I did not believe him but as we went through due diligence, further digging, questions, answers, haggling about silly details I saw that if the deal ONLY had 3 near death experiences then it would be quite expeditious. He assured me that no matter what, I shouldn’t loose my cool or take any of the process personally. (At the end, he didn’t follow his own rules)
A year later when the AOL deal started happening I planned to do the deal with my controller and my lawyer. We didn’t realize we’d face Time Warner biz dev and finance teams, AOL biz dev and finance teams, internal and external counsel (that means lots of legal bills for you, the seller), tech teams, pages of tech, finance and operational due diligence, org charts, integration plans, PRDs, migration plans, functional maps, matrix planning…. well, you get my point.
Any one of a number of things could have derailed our deal. We had disagreements about whether we’d keep our offices or move into AOL’s San Francisco offices (it took an audit of our lease, discussion with their facilities team in VA, and countless emails to figure that out), who would stay and who would go, if and when they would get offers and what would the terms, titles and comp look like.
Some person on the tech due diligence team (who we never met or heard from again) claimed our company’s product of 5 years earlier had been on a “Spyware blacklist” – we had used Microsoft’s ActiveX back then – like most companies – and EVERYONE who used it was on that list! A gunslinger with happy key fingers (these days nicely known as a blogger) kept the deal held up and forced us to restructure our legal deal to give more “protection” against the (non-existent) issue of a Spyware laden past. Cost of this exercise in stupidity? An extra $50,000 in legal fees.
I could write an entire book about this deal. In fact our deal docs were as big as the Manhattan Yellow Pages and I guess if you spend $300,000 on legal to get a deal done, you pay by the pound – I’d rather have blocks of gold for that money but so is the process.
These answers are vital to planning your deal properly, executing the proper plan to get you, your employees and shareholders across the finish line to somewhere you all want to be. I’ll probably do a follow up on this either as a newsletter post or webinar in December.
At the end of the “6 month colonoscopy” that was our sale process, we closed the deal. We did it without bankers, without providing audited financials, without alot of excess internal baggage (just a huge legal bill). Bottom line is we got a huge deal done – we were just one of 4 acquisitions for 2006 and given the time, effort, teams and resources TWX put in the deal its easy to understand why so few acquisitions actually make it over the finish line and happen
I ask my clients and people who come to my talks to ask themselves;
- Why they want to sell or merge?
- What are their post-deal goals?
- Where do they want to be 2 years out, ie still with the company, on their own again, etc.
- How can you integrate these lessons into your future deal?