Angel Knowledge Series
Best Practices:EARLY EXITS PANEL: TRIGGERING, MAXIMIZING AND BEST PRACTICES.
Panelists.
• Berkus Tech Ventures, Dave Berkus.
• Cooley, Kevin Rooney.
• Mid-America Angels, Joel Wiggins.
• Silicon Pastures, Teresa Esser.
• Tristate Ventures, Sam Klepfish.
• VA Angels, Randy Thompson.
Agenda.
A. Preparation Considerations.
1. What are the most important preparation items before initiating any discussions?
2. Old Milk: How to trigger discussions when the CEO is not (or is resistant to) initiating them?
3. Handling conflict issues of planning an early exit vs maximized value?
4. If small, thoughts to keep the costs of advisers from escalating?
5. Should angel groups have someone designated as the Exits / CorpDev person to encourage/initiate discussions?
6. Timing – consider capital structure and impact on early exit proceeds to founders – i.e. participating preferred stock.
B. Triggering Considerations.
1. Pros and cons of using brokers, how to get them engaged/focused, structuring pay experiences & thoughts?
2. Whom should be contacted? Just strategics or financial buyers or others, how many, and in what order/timing?
3. Most effective ways to contact potential acquirers, thoughts on what should be sent or disclosed in the approach?
4. Getting a competitive auction atmosphere going to boost bid prices?
5. Should approaches be customized or general for the buyer class: cost/time vs effectiveness thoughts?
6. Most acquisitions of technology start-ups are strategic buyers – best ways to get to know the likely buyers.
C. Negotiating Considerations.
1. Best ways to avoid leaving value on the table?
2. Thoughts on setting reasonable goals and valuation targets?
3. Handling weaknesses: Bring up pre-emptively or response as identified?
4. Good/Bad cop approach used often, how to best position your side of the table?
5. Philosophies on managing or avoiding brinksmanship on key terms?
6. Best ways to keep engagement and harness emotions during the negotiation process?
7. What reps and warranties are problematic and which are safer? (Dave: basket amounts & terms).
8. Thoughts on cash vs stock payment issues and reasonable splits?
9. Thoughts on leveraging offers to get counter-offers? Pros/cons/timing/disclosure?
10. The definitive agreement – address certainty of closing, price & indemnifications.
11. Common areas for dispute/uncertainty – price adjustments (working capital tests), earnouts, employee offer conditions, third party consents.
D. Due Diligence Considerations.
1. What degree of pre-bid diligence is commonly allowed (and IP/reputation protection issues)?
2. How much diligence after the term sheet is reasonable or excessive?
3. Best ways to manage how long the diligence process will stretch?
4. Consideration issues: if stock provided what are the key issues?
5. Who needs to be involved in the process?
6. Is there any benefit to the seller? (yes, disclosure schedules insurance policy for post-closing indemnification).
E. Post-Acquisition Considerations.
1. Management of reps and warranties liabilities?
2. When things go wrong (open discussion).
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