Tuesday, September 13, 2011

Selling to a Large Company: The 1-3 Year Lockup

"Realize your business life is going to be different as a division of a big company; you can no longer make decisions unilaterally. You have to get used to working as a member of a team and occasionally putting the team's needs ahead of your own." Excerpted from the article "Inside the Mind of a Billion Dollar Acquirer"

I like this excerpt because it's so true. I've seen it over and over again. Most entrepreneurs with businesses sizable enough to sell to a Fortune 1000 entity are not corporate managers who made the leap into entrepreneurship after decades in corporate America. All that security suppresses the entrepreneurial urge. Most business owners who sell their companies to strategic buyers (which most corporate acquisitions are) started and ran the business for a number of years. S/he is used to being the head honcho. To now have to be a part of the team and use democratic decision making is usually very difficult.

I've seen business owners who can do so for one year, maybe two. After that they chomp at the bit. The malcontent rises and they often blame it on the acquirer when it is often their own issue. It's a misalignment. Entrepreneurs are not corporate managers. They can pretend to be so for a while, longer if they are given autonomy, but eventually clashes will occur.

This is not to say that a purchase which requires you to work for the strategic buyer is a bad thing. Just make sure you negotiate to keep the timeframe down to 1-2 years of active duty. If the acquirer needs more support, agree to do so on an as needed, consulting basis.

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