Team - I have a close friend who is a mid-senior (right below the C-suite) at an IT startup about to be acquired by a big, slow, corporation. Its not all flowers and roses - I think the common holders might be screwed, and she has some some shares but doesn't expect them to be worth much. She also doesn't think much of the longer term strategy of the business. Whoever buys this thing might not see it grow as fast as been pitched.
However she owns two major business units and probably has a lot of leverage. About 2-6 weeks until the acquisition (she has insider knowledge) and just in case, she's secured a higher paying position at another firm who will be demanding an answer shortly.
How should she approach this? Push to secure a higher level position at the startup? Quit and ask for a severance to stay on for a few more months now? Just move on? Wait for the acquisition and then negotiate? Will the new firm instigate a package discussion right away? I've gotten great advice here before so wanted to get her situation in front of you all and get some feedback.
Alright, I'll bite since I'm currently managing through a similar situation.
Post-acquisition new management will evaluate existing employees, usually very quickly, but with a slower larger corporation it might take longer. Typically employees who get let go during the process will be asked to sign a non-disparage agreement and separation agreement of sorts in order to receive severance or any retention bonuses (i.e., "we need you until end of year and if you stay through end of year you will get $X").
Outright quitting will not give her access to severance. She could either wait until the package discussion gets brought up post-acquisition, or leave now to take her new offer if it's an exploding offer. If she has a lot of leverage, the retention bonus offered to her post-acquisition will likely reflect this. Things to think through would be how much would be required for her to stay at the current startup and would she be happy staying at the current startup if they offered her that much, given the changing dynamics of the company. The other issue here is obviously she doesn't know the exact timing of the package discussion.
The very ideal situation would be that the package discussion happens right away so she has the ability to see her compensation and role with the new company. This would allow her to try and negotiate if she wants to stay at the existing company, or use it as leverage at the other firm (assuming they didn't retract the offer due to time). If she finds out she's getting $X as a retention bonus, she could tell the other firm "Hey, I'm getting offered $X to stay for however many months. If you guys are willing to buy out my bonus and pay me $X, I will leave and start with you guys now." Or she could negotiate with her new role and salary if they offer her to stay. There could be no change in this, the acquiror could just keep her position as is.
Hope that helps a little!
"she" lol
Question - post acquisition - could she force the conversation...e.g. preemptively say she's not sticking around without a severance? Or some sort of package? Or would this be such bad form that the new Co or even old managers say sayonora. Or would this be all dependent on specific leverage?
Depends on how she phrases the conversation. It would be totally fair post-acquisition to say "Hey, I realize the company is going through a lot of changes right now and I would like to discuss where I fit in within the new organization" and go from there.
I can't really tell based on the information given what the desired outcome is in the situation, whether it's stay with the existing company but get more compensation or receive severance from existing company and move to the other job offer. She just needs to have a clear outline of what she wants to get out of this.
Yeah my understanding is that the management has been talking about elevating her in the organization for several months to a VP role but because of politics that hasn't happened yet. Just talk. I don't think she wants to stick around long without being a part of the management team.
But that team won't really exist in the greater org. Not sure if there is any benefit to getting the title for a month just to be aqcuired and reorged.
I've invested in a number of early stage tech businesses. Over half a dozen have exited through acquisition. All but one were to corporates (BigCo), only one was to a later-stage startup (scaleup).
The way you describe this makes this sound like a 'soft landing' or an acquihire where the founders are making sure investors get their money back and employees keep their jobs.
In those instances it's pretty clear which employees matter and will continue to have some degree of ownership over their work and who won't.
If we grid that fact against the modern work environment where the only guaranteed way to change your payscale and title is by switching firms, I think there's a pretty clear choice here.
If there's an exploding offer from a firm that's serious enough to offer better comp, that's the compelling path. Internal politics with the startup's existing management team haven't yielded a title boost yet, and that management team is about to disintegrate when swallowed up within the larger apparatus of BigCo. On top of that, BigCo is BigCo: they'll initiate a painfully slow process of assessing and eventually reorganizing the acquired company. That sounds like Chinese water torture.
Just move on. Take the better job and save the two months remaining in the acquisition process plus the six months post-acquisition for all the onboarding interviews and integration headache. Buckle down into the new role. 12-24 months later there will be a surfeit of new opportunities with a stronger title and payscale.
I know someone that was in a similar situation although a bit higher up ie CTO/CSO but wasn't a founder (ie had no say with VCs/investors for the sale). Said person basically made sure his shares would be sold and wouldn't get/minimise shares of the new co as his title was going to be reduced (therefore less impact onto equity), he argued for a better base due to economies of scale - took all of his leave days (in Europe where you are given 20 days/year) and by the time he used them all the acquisition was announced, got a decent amount of cash and ran away to the new firm.
Not sure if this would be possible and it requires waiting a bit, but would be the ideal compromise.
APEA - thanks for your commentary. Definitely agree on the "soft landing". This won't end well in the long run for anyone but a select few. She's expressed to me that management has doubled down on their "you have a future here" talk. But looking at the business fundamentals, its hard to truly believe that, and management probably doesn't have a leg to stand on here. They have included her in the management pitch presentations to the new firm though.
PEM - I guess your comment here is also interesting. The time to negotiate is now and its a just a quick land grab to force the current management to pay her extra to stay through the acquisition? Only issue is, the CEO Is well respected in town. Used to work for some big competitors and very well networked in the industry.
She did officially get an offer at a new firm, and its a push. She has several other options that may come through. I think she's going to wait. Not sure. More feedback welcome.
If she were going to continue in a higher level position of importance that would be good for her career she would already have had conversations with the acquirer about this. They would be attempting to lock her up with retention bonuses etc. If this is a timing issue, go with the new firm as it's a known quantity and one that seems to be a better option from what you've said here.
I would definitely recommend her to move on(run away to another firm). Even if new management promises to "keep the existing employees", basing on my experience, their guarantees mean nothing. New management = new rules. Better save your time and nerves and move to another place. Sorry, if I'm being too strict, my opinion is not "ultimate truth", if you know what I mean.
I have a follow up question here - at what point do conversations related to a future with the acquirer happen? Would she have already had such conversations before or after a purchase offer document was submitted?
Depends how quick things get moving and when the closing is. Decent companies would have the c-suite and senior level stay/go decisions ready a month or two prior to closing (depending on how quickly the close process is)
Also depends on the size of the target co. Is it 1,000 employees? 500? 300? That’s possibly the biggest factor
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