Selling Your Startup

13Negotiating the Price Tag

You've met with potential acquirers, received an LOI, and have communicated it to your board members. Now comes your chance to negotiate and maximize the value of the deal. So, what are the most important elements here? How do you make sure you are getting the best deal you possibly can, without being too greedy and turning away great buyers?

Price versus Terms

The price tag may have value for a couple of reasons—like crossing the mental barrier (for some of your investors or acquirers) and perhaps establishing your credibility and reputation for launching future ventures. Having sold a company for $1 billion or more certainly carries some weight. Many significant acquirers won't do small deals. They are more likely to buy roll-ups with higher price tags. A big price tag can make investors and cofounders feel special and accomplished.

Although the top line price tag shouldn't be completely dismissed, the terms are far more important because they may dictate these outcomes:

• How you get paid in terms of currency and when
• Who gets how much
• The structure and net after taxes (which can make all the difference)
• How enjoyable or demoralizing the process is
• How good the deal really is for the company, mission, and customers after the transaction.

Be keenly aware that giving up a lower top line price may actually be more beneficial when it comes to the net proceeds and future (thanks to the terms) and that a higher price tag may not always yield a better ...