Startup Boards, 2nd Edition

Chapter 26Buying a Company

As with the sale of a company, the board will be involved in making acquisitions. However, the board's role in acquisitions is more advisory and less operational than during a sale process.

While the idea of pursuing an acquisition often comes from the management team, it can also come from a board member, since they may know companies to acquire that can grow and strengthen your competitive and economic position. If you're a first-time CEO and have never acquired another company, rely on help from your board throughout the process. Many of your directors will be far more experienced at thinking through and executing a transaction.

Negotiating and Structuring the Deal

There are some circumstances where leveraging one or more of your directors to help with the high-level elements will make sense. In particular, if you are interested in exploring a competitive consolidation, that conversation may be sensitive and hard to broach. Use a director to approach the target, especially if one of your VCs knows the CEO or a director for the company. When Matt's previous company, Return Path, was interested in merging with its top competitor, Veripost, Matt relied on his lead investor, Fred Wilson, to open up the conversation with Brad, Veripost's lead investor. Although Matt and Veripost's CEO, Eric Kirby, ran most operational aspects of the deal, a parallel communication channel between Fred and Brad was essential to negotiating the high-level terms, closing ...