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Anatomy of an Acquisition
Netpreneurs Discuss The Business And Human 
Sides Of M&A

(Washington, DC -- February 24, 2000)  Earn-outs, financial planning, negotiation strategies, valuations, intellectual property protection—they're just a few things to prepare for when selling your business.  Nonetheless, the panel at today's Netpreneur Program Coffee & DoughNets meeting all agreed that the most important factors in this ultimate business decision are not dollars and cents, but people and emotions.

Scout Master Oron Strauss Says "Be Prepared" With Seven Lessons Learned From Being Acquired

  1. It takes forever.  Ten months for Net.Capitol, six for ToFish!.  At least you have time to learn a lot about the people who may make up your new team.  Use it wisely.

2. It ain't easy.  Net.Capitol's agreement with Netivation was 200 pages long.  ToFish!'s was even bigger, so get good advice in order to get a good deal.

  3. It's personal. A lot of people have a stake in the outcome of your decision, and an opinion about it as well.  As CEO, your job is to balance the interests and make the right things happen.  Remember, it's not just your life that is affected by those decisions.

  4. You learn who your friends are.  Things can sometimes get nasty when people's futures and egos are at stake.  Separate the emotion from the deal.

  5. Don't forget your people.  Get all of your constituents on board, including employees, customers and investors.  You'll find valuable insights and support.

  6. The future matters.  There will be more things to do after the acquisition, not less.  You'll be doing them in a new role, with new people and a new culture. Are you ready, and is that what you really want?

  7. You're always an entrepreneur.  You started your company for a reason.  Don't forget why, or who you are.


"I had no idea how emotional this experience was going to be," confessed Raj Khera, who sold his firm Govcon to VerticalNet just weeks ago.

Despite the high profile of Internet IPOs, acquisition is the predominant exit route for successful entrepreneurs.  According to moderator Alexandra Reed Lajoux, an expert and author on mergers and acquisitions (M&A), there are approximately 400-500 such deals a year in the technology sector, at an average price of $300 million and a median price of $35 million.

Joining Khera and Lajoux to discuss what it's like to sell your business were two other young netpreneurs who recently did just that, as well as Mario Morino, a 30-year technology industry veteran who has been on both sides of the negotiation table many times.  While they all spent a good bit of time providing practical advice on the business aspects, the human factors were the recurring theme.

"Deals are about people," stressed Oron Strauss, whose company, Net.Capitol, was recently acquired by  There is one upside to the fact that the deals can take so long to close, however.  Strauss said "It forces you to build a relationship.  Are these the people you want to team with?  Ultimately that is the personal decision that you and your management team have to make."  Morino agreed.  "You may negotiate the greatest deal," he said, "but if the chemistry and mechanics don't work, post-deal you lose."

That means two things for the acquisition process.  First, you have to contend with emotions—yours and those of your employees, customers, investors and the would-be acquirer.  It requires soul searching, thinking ahead and knowing what you really want out of the deal.  It also requires you to remember the obligations you assumed and the promises you made to others long ago.

"It's personal," explained Strauss, and it isn't easy. "Negotiation is tough.  Bringing your people around is tough.  You, the CEO, are right in the middle of it.  It is an incredible balancing act to try to bring together a number of different constituencies and make as many people happy as you can."

What's more, life goes on after the sale, often with a new culture and a new role for entrepreneurs who stay on, as most do for at least a while.  What does that mean for Frank Wood, who just sold his company, ToFish! to America Online?  Asked by an audience member, "What about the culture fit when a small company is acquired by a big one?"  Wood deadpanned, "I sit in cubicle 4BHO8 and I'm really happy."

M&A complexities are the other reason why people are the heart of any deal.  You have to assemble the best minds that you can for advice, support and active assistance.  Throughout their talks, all of the panelists credited others when telling stories about the process, from Strauss who got help from one board member in overcoming the objections of another to Khera's strategy session with a mentor while driving from  the first negotiation.  Wood's advice is pointed, "Find somebody to help you through this process if you haven't done it before."  He credited Gina Dubbe of ToFish! investor Steve Walker & Associates for the success of their deal.  Wood said she "saved the day more times than not."

"This is when you don't worry about paying an attorney $500 an hour," Morino advised.  "Don't do it normally, but at this point in time you go for the very best, even if you have to bypass your existing counsel.  You are dealing with your life, and you don't want do make a mistake now."

People and emotions are just part of the matrix for what is still a business decision.  The presentations and Q&A provided much practical advice on both strategic and tactical issues, all recorded in the transcript and streaming video of the event.  While it will take hard work, planning and sound advice to tackle those business challenges, just be sure not to forget the human side.  Deals close and events pass, but people go on.  And they remember.

Successful entrepreneurs go on, too, often to pursue other ideas.  Khera did not join VerticalNet with the acquisition, choosing instead to pursue a second business he has been building,, a Web resource center for small business.  Woods may be happy in his cube at AOL now, but, "I plan on doing it again at some point in the future," he said.  Strauss believes that once an entrepreneur, always an entrepreneur.  "This is about your life, and chasing your dream and living out your destiny.  Have fun with it.  Enjoy the process."

Copyright 2000, Morino Institute. All rights reserved.



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