Published on May 1, 2023
The firsts in life can be stressful. Buying your first house. Raising your first child. Getting married for the first (and hopefully final) time. The stakes are high enough without also building and selling a business. And nowhere can emotions scupper plans more than in your first acquisition.
You’ve probably invested years into building your startup. Eschewed a social life for a growing, profitable business. Now you’re ready to get Acquired. You can almost smell the money on the table. Can you bring it home? Because everyone is relying on you, and that’s a lot of pressure.
You could also be alone in the acquisition process. Perhaps unable to discuss it with your team. Your spouse probably can’t help you. Your friends don’t understand the mechanics. You’ve got all these relationships to manage and no one to lean on – and the process itself to navigate.
Let’s be honest: Most deals don’t close. Imagine millions of dollars dangling under your nose only for them to vanish like some cruel joke. Time offers no guarantees. You might invest up to a year (or more) into an acquisition, but the buyer can still get cold feet and walk away.
As a result, emotions run high, and ironically, these emotions can and do derail acquisitions. To improve your chances of closing successfully, you need to galvanize yourself to the process. Build a support network and learn how to vent without jeopardizing your deal.
You’re Already Emotionally Fraught
You possibly spent the last five to seven years working 80 hours a week on your startup, maybe more. You’ve invested everything into your company and bore it through tough and trying times. You might not want to admit it, but you’ve stretched your mental wellbeing pretty thin already.
Entrepreneurs report 50 percent more mental problems than others in their demographic. Normal life might be boring, but at least you’re not answering support queries or fixing bugs at two or three in the morning. Few would blame you for having thought of quitting at least once.
And not to be morbid, but you might be forced into selling your company by some unexpected life event. Bereavement, divorce, or – cosmos forbid – an illness of some kind. You can’t predict the future and that uncertainty only adds emotional strain to an already fraught process.
The Acquisition Turns the Screw Even Tighter
Acquisitions are stressful because they demand so much attention. You need a steady hand to navigate each stage and the mental fortitude of a Shaolin monk to manage relationships. Everyone has an opinion on how things should go down, which can feel like walls closing in.
First, there’s the asking price. If you’ve prepared well, you’ll have spoken to your partner, family, advisors, or investors about it. You have your expectations and they have theirs. Maybe everyone is on board, maybe they’re not, and this is where conflicts can arise.
People with a stake in your acquisition will also have talked to their tax advisor, wealth planner, friends, and family. Maybe a cofounder wants to retire early. Another wants to put a down payment on a house or go on a vacation. Your decisions influence their future happiness.
If you negotiate the asking price of your dreams, you might lose on terms. Maybe to make everyone happy you might need to stay on with the buyer for a year or two. How will you feel about that shift in dynamic? No longer the boss but an employee of a company you built.
Let’s assume a best-case scenario and the buyer offers you everything you’ve asked for; will you have the focus to see it through? Or will you get caught up in the post-acquisition fantasy, drop the ball, and stare, in shock, as the buyer withdraws their offer?
Because deals fail all the time. You could spend nine months working on your acquisition and it still falls apart. You might have some backup offers you’d rejected earlier, but will they still be interested? Did you hit the milestones they expected you to hit in the meantime?
With so many shifting dynamics, you’re adjusting your identity throughout the process, trying to be everything to everyone. Before, during, and after acquisition, your role in society changes. You were once a founder, but what will you be after? Serial entrepreneur? Parent? Musician?
And let’s not also forget the emotional distress of letting go of something you’ve loved for so long. How much of your life did you spend developing the product and delighting customers? Imagine the onslaught of memories: the first customer, first employee, or first million dollars.
How to Stay Cool Under Mounting Pressure
Buyers understand they’re entering a charged atmosphere. The stakes are high for them, too, especially if it’s their first acquisition. But everyone has a red line. Yell, snap, or refuse reasonable requests and you’ll alienate even the kindest and most understanding buyer.
We all know how hard it is to keep our emotions in check when we’re under pressure. Trusting that you won’t get emotional is wishful thinking at best and reckless at worst. Don’t leave anything to chance in your acquisition. Create a plan to manage those emotions now.
Life After Acquisition
I ask this question all the time: What will you do after the acquisition? Are you going to travel for a while? Work at a nonprofit? Start a new company? Learn a new skill? Retire early? Mentor other startups? Your post-acquisition intentions require a customized acquisition strategy.
Perhaps the worst thing you can do after you sell is do nothing. After donating years to entrepreneurship, you’ll feel uncomfortable sitting around and twiddling your thumbs. Your startup was your purpose. What new purpose will you take to avoid feeling rudderless?
Talk to People Who’ve Experienced the Process
Blame uncertainty for the emotional roller coaster during your acquisition. Learning the process inside and out and talking to people who’ve gone through it before can be of enormous help. And there are a lot of people who’d happily discuss the process with you.
Start with your advisors: Your tax advisor, wealth planner, accountant, and acquisition professionals (valuations experts, for example). Reach out to founders in your professional network to ask what to expect, what mistakes they made, and how they felt at each stage.
Determine Great and Good-Enough Scenarios
Nothing lasts forever. Not even your valuation. Given enough time, it could rise or fall. Holding out for your dream valuation exposes you to outside agents: competitors, market dynamics, new technology, and waning public interest. Time may not be on your side.
Once you’ve captured the interest of a few buyers, don’t fall victim to grass-is-always-greener syndrome. Some founders start from the minimum they need to achieve their goals and work upward from there. Determine a spectrum of possibilities and negotiate from the best available.
Prepare Your Loved Ones for (Potential) Tantrums
Repressing your emotions might be worse than giving them free rein. You can’t eliminate emotions from the acquisition process, and trying to will only make you more stressed. Instead, create strategies that lessen their impact on your wellbeing and that of those around you.
For example, will you take your frustrations out on friends and family? It’s normal to act a little irrationally when under pressure. But before you rankle your co-founders and loved ones, remind everyone before entering the process that you might be a little out of sorts until closing day.
Speak to a Neutral Third Party
Your loved ones and advisors probably have a vested interest in how your acquisition story ends. They might not have your absolute best interests at heart because they can’t see past how it will impact them. It therefore pays to speak to someone outside of your process.
Maybe you’ve hired a CEO coach who’s sold two or three companies in the past. They have no dog in the race (other than your success), so you can speak freely, unload, and maybe hear some objective advice. The same applies to a therapist or other health professional.
Ask as many questions as you want. The buyer expects it, and so do your advisors. You won’t look foolish or demanding. People who’ve been through at least one acquisition feel less pressure on their second and third because they’re familiar with the process.
When things are going your way, it’ll seem like nothing can go wrong. But I don’t know of a single closed deal that didn’t encounter at least one stumbling block. Asking questions will help you avoid losing your cool when something inevitably goes wrong.
Find Your Release Valve
Everyone needs time to vent. Some go to the gym. Others listen to music. What’s your pressure release valve? Derive some coping mechanisms to maintain perspective during the process and make decisions with a clear head. It doesn’t matter what activities they are doing so long as they work.
Triggers might be price, terms, or the wellbeing of your teams. Rather than let your emotions overwhelm your reasoning, go play video games or do fifty pull-ups to refresh your mind. Find your release valve and then you know what to do when you feel overwhelmed.
An acquisition offer is payback for years of hard work. No, the process isn’t easy, and yes, it can fall apart at any moment. But it’s part of the life cycle of a business. And when you keep your cool throughout, you stand the best chance of closing at a price and terms that make you happy.
This article was written in collaboration with Acquire.com
*** The content is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional(s) before entering into any M&A transaction. ***
For More Information
Shawn Flynn is a Principal at Global Capital Markets, a premier middle-market investment bank with a global presence. Shawn has expertise in mergers and acquisitions, capital markets, financial restructuring, and secondaries. He speaks Mandarin and is the host of the award-winning Podcast The Silicon Valley Podcast. Connect with him on LinkedIn.
Shawn Flynn, Principal SF@GlobalCapitalMarkets.com
Tel (415) 578-1445 Ext. 4
About Global Capital
As a middle market investment banking boutique, Global Capital provides mergers and acquisition advisory services, access to corporate debt and equity capital, and strategic advisory services to successful middle market companies. For over twenty five years, our team has offered companies a unique blend of sophisticated financial expertise and access to the global marketplace of buyers, sellers and financiers.
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