One More Reason to Take That M&A Offer – Sponsor Turnover

In the last 2 weeks, I met with two other CEO/founders whose companies had been acquired in the past 12-18 months.  In some ways their experiences were different than mine.  One was a consumer internet company acquired by an entertainment company.  The other was a SaaS company, yes, but one that was basically pre-revenue.

But one thing was eerily similar.  In both their cases, and both of my start-ups … the deal ‘champion’, the sponsor, at the acquirer was gone within 6 mos of the deal closing.

So I had a data set of 4 deals.  So I reached out to another few colleagues / friends.  And the story seemed to repeat itself.  An informal survey, and an unscientific one, I agree.  But I’d say in more than 60% of the time after M&A, the deal’s sponsor at the acquiror was gone that same year.

The why can vary.  In some of the cases, VP level turnover was very high.  In others, the CEO turned over (less common).  In others, it was a better opportunity (these are heady days).  In still others, it seemed almost random.  But it really doesn’t matter why.

So the learning: don’t ever assume an offer will be there next year.  Your VCs may tell you to pass, because “the offer will only get better next year.”  I doubt it.  Not only because priorities change, always an important risk.   But because your sponsor may well be gone by then.

Image from Zazzle.

2 comments

  1. I’ve seen much the same. Even if the sponsor isn’t lost, the companies priorities can frequently shift. In one case, my startup was bought, and then the company that bought us was bought within 6 months. BTW, good reason to negotiate acceleration of vesting if the acquirer is bought. Usually not hard to get as it doesn’t occur to them that they would be, after all, they think they are the big fish!

    Dropping back to the bigger picture, large organizations making large acquisitions are doing so to fix some large problem quickly. That implies there is a lot of career risk there for someone, probably your sponsor. Frequently an acquisition can be their swan song and they’re not given enough time to make it work, or they use up their remaining political capital pushing it through. Look at Leo’s big Analytics acquisition for HP, for example.

    Cheers,

    BW

  2. Yes it’s difficult to imagine HP spending $10,000,000,000 for Autonomy today ;)

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