Selling a Company: Important Considerations as Discussed by the Experts

10 May 2016 Technology Transactions Today Blog

As tech founders and executives contemplate the possibility of exiting their companies, there are multiple factors they must consider. On May 3rd at FoleyTECH Chicago 2016, four seasoned entrepreneurs  came together to discuss their different reasons for, approaches to and ideas about selling a company.

  1. Culture
    Company culture is important, and as a company grows, its culture becomes harder and harder to maintain. It is at this point that it may be time to sell. Furthermore, when a company begins to work with an investment banker to facilitate the sale, it is necessary that the investment banker understands the client’s objectives and that the process meets those objectives. The investment banker must also understand the intangibles and what is important to the company.
  1. Alternative Sources of Capital
    If a founder decides to stay on at his or her company despite having sold it, he or she may struggle with keeping control, as outside investors will throw their weight around. A founder can circumvent the fund-based approach and look for other sources of funding with family offices or even large public companies that see a technical disruption in the industry and as a result may be willing to make an investment.
  1. Liquidity Event Preparation
    A performance-based rather than an activity-based approach paired with professional management is key. A company needs to be able to explain its story, and will be able to do so with the help of statistics and data that professional management will bring to the table. Although a liquidity event may be avoided by going to the bank or through friends, it is always a good idea to be prepared for one.
  1. Exit Timing
    A final and perhaps most important consideration is that a company usually won’t be able to control when it exits. As a result, optionality in terms of management will prevent duress in the event of a sudden sale. It is also important to gradually develop a relationship with attorneys and investment bankers who are experts in the particular industry, providing valuable benchmarking information that will ease the process should there be a sudden exit.

The economics of selling a company is only a small piece of the equation – the rest is the passion, commitment, stewardship, and fun involved in the process, which in and of themselves are immeasurably important and should not be undervalued.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services