Magic Box Paradigm: A framework for startup acquisitions by Ezra Roizen

Author:Ezra Roizen [Roizen, Ezra]
Language: eng
Format: azw3
Publisher: advsr ideas
Published: 2016-10-06T00:00:00+00:00

Time to spin up other conversations

Guess what? All of this can take weeks, or even months.

That’s a good thing, as you may want time to spin up conversations with other potential targets—the ones that have shown an appreciation for your magic box’s potential. Tempting as it may be, refrain from forcing their hands into any sort of rapid decision-making situation because you’re having ongoing discussions with the original potential buyer. Play it a little cooler with them. Broach the topic of joining forces in general terms, and assess the levels of interest you’re getting from the most likely candidates.

For example, if you learn a potential secondary target is in the middle of another acquisition or a corporate reorganization, then a hard push from you will most likely be dead on arrival. In other instances, however, even just a tiny nudge might induce a target into the acquisition discussion. Best to do some reconnaissance before dropping urgent requests for participation in your emerging process.

In particular, if the original deal falls apart, you don’t want to have to answer uncomfortable questions. You can hint that you’re generally thinking about joining forces with a larger player, but each conversation should be kept distinct from the other. Don’t try to play potential buyers against one another. Doing so may force one of them to demand that you go exclusive with them. And that’s the primary constraint you’re trying to avoid. You want to keep your options open as long as humanly possible.

There are lots of ways to assess the marketplace for the possibilities of a better deal without also tipping off your current buyer that you’re exploring other prospects. No need to spook the current buyer into a more aggressive deal posture.

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