Startup Boards, 2nd Edition

Chapter 25Selling a Company

When another company approaches you about buying your company, an intense series of events begins, many of which include your board. The same is true when you and your board decide to sell your company proactively.

Confidentiality

At the beginning of any merger and acquisition (M&A) transaction, both parties (buyer and seller) will enter into a confidentiality agreement. A lightweight non-disclosure agreement is satisfactory, but your counsel will often recommend additional provisions. The agreements apply to board members, so inform them of what's been signed so they can respect them.

A signed term sheet will often include a no-shop agreement. This is an agreement by the seller not to engage in any conversation about selling the company with any other party during a specific period, usually between 30 to 60 days. Inevitably, when rumors or leaks occur, outside parties such as the press, investment bankers, or other potential buyers reach out to board members. Given the presence of confidentiality agreements, especially with a non-shop in place, board members should be particularly sensitive to these situations.

Whenever a confidentiality agreement or no-shop agreement is signed, the board should have a deliberate conversion about the presence of the agreement and how each board member should react if contacted by someone regarding the transaction while it is in process.

Finally, board members should be conscientious in situations where the buyer ...