Sid Faulkner, CFO of Ciranova gave a talk today on “Navigating the Treacherous Path of Mergers and Acquisitions” at an event at Abbot Stringham and Lynch. Mr. Faulkner was Vice President and Chief Financial Officer of Oak Technology, Inc. where he led the 1995 initial and secondary public stock offerings, established an active program of intellectual property protection, and participated in the acquisition of four companies. He was also CFO at Altos Design Automation when they were acquired by Cadence, CFO at Gemini Design Automation when they were acquired by Synopsys, and CFO at Auto ESL when they were acquired by Xilinx.
Here are three tips that I took away that are most applicable to bootstrappers:
- Complex Roller Coaster Ride: Every M&A transaction will have negotiations, due diligence, plenty of work, and an emotional roller coaster. It may take anywhere from three weeks to six months to close a deal, after you have a term sheet. Avoid “We won the term sheet, they won the documents,” make sure that term sheet agreement is reflected in final deal documents.
- There is Something About a Closet That Makes a Skeleton Restless: word of a deal will encourage competitors to press you harder, suppliers to negotiate harder, unhappy employees to renegotiate compensation. Settle lawsuits, clean up the capitalization table and all stock and option agreements, and make sure intellectual property assignment, offer letters, employment agreements, and any termination agreements are all signed and filed before you start to shop the company.
- You Know Your Customers Love You But Can You Prove It? Can You Quantify Their Love? Keep contracts, license agreements, purchase orders, invoices, and any and all revenue recognition policies and decisions documented and well organized. It’s better to maintain them as a part of an ongoing effort than try to pick up the slack during a due diligence cycle.
Update May 9: Carol Wagner, who moderated the panel, has posted her thoughts key take aways on “Mergers and Acquisitions: Your Price and Your People“
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