Download to read offline
Uploaded byWojciech Seliga
Sprzedawanie własnego biznesu IT - Confitura 2023.pdf
Wojciech Seliga provides advice on selling an IT business based on his experience co-founding and later selling two software companies. He discusses: 1) Reasons founders may want to sell a business, such as needing serious investment, personal issues, founder relations, or fear of the future. 2) Reasons a company may be acquired, such as to grow revenue, acquire talent/intellectual property, or eliminate competition. 3) The timeline of selling a business, from initial conversations through negotiations, due diligence, and closing the deal. 4) Key areas examined during due diligence, including products, customers, finances, employees, intellectual property, and more.
More Related Content
Similar to Sprzedawanie własnego biznesu IT - Confitura 2023.pdf
![InfoShare 2012 efektywne przeglądy kodu w zespołach agile [Polish]](https://cdn.slidesharecdn.com/ss_thumbnails/infoshare2012-efektywne-przegldy-kodu-final2-120423094208-phpapp02-thumbnail.jpg?width=640&height=640&fit=bounds)
Sprzedawanie własnego biznesu IT - Confitura 2023.pdf
- 1. Wojciech Seliga, 24.06.2023 Sprzedawaniewłasnego biznesu IT Jak nie wtopić i co potem 1
- 2. About me Former softwareengineer, now investor and advisor • Software engineer by choice; started programming nearly 40 years ago • Entrepreneur by accident • Co-founded Spartez in 2007, co-CEO and CEO for ~10 years • Sold two companies to international global companies • Participated in a few other acquisitions (IT and non-IT) on a purchaser side • Shared experience with many fellow founders who also sold their businesses Skiing, tennis, badminton, mountains (cycling, hiking), building garden 2
- 3. I cannot tellyou everything, but I’ll try to be as informative as possible NDA 3
- 4. Spartez x2 TL;DR ofour story • Founded in 2007, born from love of Atlassian and Agile, and hate of a big dreadful corporation • Evolved into two separate companies with multi-million dollar revenue, strong profitability and employing around 250 people • Spartez - a service company (software house) - key software services provider for Atlassian, sold to Atlassian in 2020 • Spartez Software - a product company - several products for collaboration, one of the top vendors in Atlassian ecosystem, sold in 2021 to Appfire 4
- 5. IANAL Good intentions, noresponsibility taken! 5
- 6. or give upfounders’ control • serious investments needed to reach another level, new market or successfully compete • personal issues: frustration, health problems, lost energy, lost vision, lost interest, not enough skills to go bigger, new interests • founders relations • fear of the future (new competition, talent, taxes, global economy, changing technologies, government) • founder needs a lot of money • offer too good to refuse • the company hit the milestone for selling it Reasons to sell 6
- 7. Types of theacquisitions • to grow own business - revenue (turnover) - non- organic growth • for already generated profit (especially bigger and less risk-averse funds) • for talent (people) - acqui-hiring or acq-hiring) • for the know-how (key employees, patents, business secrets) - eg. AI • for customer-base - cross-sell, upsell • for products - complimentary portfolio, integrations (synergy effect), growth potential, new markets (e.g. Atlassian -> Microsoft) • to eliminate future threat (competition) Reasons to buy 7 https://www.flickr.com/photos/diversey/48171830901 - CC BY SA
- 8. Timeline Pre-Termsheet “Funnel” Spread the word (orstart answering M&A inquiries) initial conversations NDAs deeper talks serious conversations initial proposals negotiations termsheet Time: usually 1-4 months 8
- 9. Termsheet (or Letterof Intent) • Serious commitment from both sides to close the deal, unless a big fuckup found • Purchase Price (can only go down in case of problems found) and payment conditions • Main conditions (e.g. role of founders, employee retention) • Equity awards • Confidentiality, exclusivity • Delaware law • Usually short document (up to a few pages) • Atlassian made it even open: https://worklifeblog.atlassian.net/wiki/spaces/WLB/pages/196609/ The+Atlassian+Term+Sheet. Big kudos to them! • Gating moment for Due Diligence to commence! 9
- 10. Timeline Post-Termsheet Period termsheet Time: usually1-4 months Due Diligence (1 - 2 months) Deal Documents drafting & finalisation Signing deal Internal Comms Formal approvals Buy-ins Closing Conditions Closing amount of work Comms preparation 10
- 11. Be prepared for10x more work & stress than you think it would involve Hire good lawyers! Countless meetings and requests, tens of people involved (on the acquirer’s side), hot scanner, dozens of documents prepared, hundreds of pages to review, clarify, negotiate, review one more time … 11
- 12. Due Diligence standard focalpoints 12
- 13.
- 14.
- 15.
- 16.
- 17.
- 18.
- 19. 4 Personal & Customerdata 19
- 20.
- 21. Employees are yourassets • Org chart (everyone counts!) • Roles & Responsibilities • Levels • Salaries • Status (e.g. intern, probation, fixed term, leaving) • Performance issues (and PIPs) • Bonuses & perks • Disability, diversity, equal treatment, misclassification • Attrition, departures, exit interviews, competitors • Attraction and retention strategy • Risks and anticipated problems • Work permits Staff 21 https://www.flickr.com/photos/102642344@N02/10187142295 - CC BY 2.0
- 22.
- 23. People are keyassets of software companies - your buyer knows it! • buy-in from your leaders and key employees (difficult: secrecy vs involvement) • current R&R and future expectations • financial & equity expectations • continuity of the business • risk diversification • scalability of the business Key employees 23 https://www.flickr.com/photos/bcgovphotos/5710663958 - CC BY-NC-ND 2.0
- 24.
- 25. cleanness & ownership •source code ownership • digital art (e.g. logos) • patents, trademarks • 3rd party licenses used (viral licenses or copyleft) • StackOverflow snippets • contracts with employees, contractors, suppliers, students (civil contracts) • licenses granted • founders’ code IP 25 https://www.flickr.com/photos/arselectronica/13994747444 - CC BY NC ND 2.0
- 26.
- 27. Absent on thelist Far less important (or perhaps easy for own verification…?) 27
- 28. Physical assets computer hardware, officeequipment 28
- 29. Software quality source code, architecture,tests, dev env & processes, known bugs 29
- 30. Products functionality features, limitations, APIs,integrations, resource utilisation 30
- 31. Product Company AcquisitionScale Whereas there is some value on the right, far more value is on the left 31 • Costs • Software quality • Functionality • Physical assets • Processes • Revenue & trends • Customers • Competitive advantage • Clean IP • Crew
- 32. Due Diligence -Summary • A long, stressful, exhausting and bureaucratic process (especially for the acquired company) • High costs (lawyers, consultants, time of numerous employees “under the tent”) • Exclusivity as an obvious thing • Very difficult for the seller - confidentiality & doing business as usual • Very long checklists of documents to submit for review • A lot of stress (finding all old documents) and mundane work (like scanning, translating, explaining) • Tens of people involved (easily >50) on the acquirer side (and their consultants) • Relatively few people involved on the seller side (secrecy!) • Virtual Data Room • The offline archive 32
- 33. The anatomy ofthe agreement (deal documents) … Or why it’s far more complicated than you think • Share Purchase Agreement (SPA) • often surprisingly small (10 - 30 pages) • Disclosures (Representations and Warranties) • often several documents - so called schedules • easily hundreds (!) of pages • Covenants • Closing Conditions • Closing Logistics • permitted decisions (typically BAU) • permitted dividends • payout • Shares Transfer Agreement registration ownership accounting real estate tax indebtedness bank employees fixed assets transaction fees defects material contracts contaminants domains licenses used bonuses privacy permits & concessions IP labour unions contractors suppliers misconduct compensation employee benefits insurance identified risks major customers representation statutory consents payoff letters location of the sources licenses given 33
- 34. Warranty Why lying isa very bad idea • Unlimited warranty for fundamental representations and warranties • Several years (usually >5) for other representations and warranties (e.g. with tax implications) • Full responsibility for the fraud 34 • Penalties up to the purchase price • Earn-out • Payment with equity & vesting schedule • Withholding Amount or Deal Insurance What How
- 35. Closing The last 100meters • corporate structure changes (e.g. transformation) • paying back any current liabilities • solving employee problems • converting employees • cleaning up company-founders affairs • paying out allowed dividends • preparing fresh financial statement • meeting all other conditions defined by the parties 35
- 36. How Much? Long expectedquestion… 36
- 37. Yours truly “Your companyis worth as much as the highest serious offer you could get” 37
- 38. Service company • profit-basedvaluation • stability of the business • diversification of the customers and/or the quality of the existing contracts • staff turn-over • staff-fit (technology, culture, location, structure) • cost structure (e.g. salaries, office costs) • usual valuation: 4 - 8 x EBITDA • turnover-based valuation (ARR for subscription based business) • ARR (or MAU/DAU) growth dynamics • potential of the product(s) (TAM size) • quality and reputation of the product(s) • customer-base fit • portfolio fit • go-to-market strategy fit • know-how fit • unusually high (or uncuttable) costs • usual valuation: 3 - 20 x ARR* Product company *but in reality varies crazily and changes dynamically, 50-100 x ARRs are not unheard of (e.g. Figma acquisition by Adobe with >100 multiplier) 38
- 39. Lessons learnt • Ifsomething is not written down (and signed), it does not exist for the buyer • The order (written rules, processes, signed documents, consistency!) is your friend. The chaos is your enemy. • The order != bureaucracy. • The order turns into chaos unless you take care of it all the time (refactor!) • Human factor is a very serious risk • Selling period is a bad time for fixing your company. First fix, then start selling. 39
- 40. All these thingsare important for running a healthy company, not just selling it! 40
- 41. Life after exit- what next? 41
- 42. Large Capital StressSyndrome 42 10 000 000 PLN 17% inflation 1 700 000 PLN annual loss ~1000 PLN / hour 140 000 PLN / month LCSS
- 43. The only personin the room… 43 “ ” You are the average of the five people you spend the most time with. Jim Rohn
- 45. Dealing with post-exitproblems • not selling at all :) • staying at the acquired company or getting a new role in the acquirer • starting new businesses (warning: contractual clauses can make it difficult!) • becoming executive advisors or coaches • becoming investors • teaming up with other people in similar situation (e.g. in private equity funds) • becoming teachers • becoming travellers or moving to “I can afford living here well for 100 years” countries 46
- 46. Think about yourfuture post exit upfront! 47
- 47. Build and sellyour company before you are 42 years old or as developer you are screwed… 48 NOT REALLY • building and selling a company is a flawed goal • happy & awesome “elderly” developers do exist • balance the risk/award/fun by joining an early stage company or a startup • the “post-exit heaven” may not exist or is different what we expect …
- 48. Parting thoughts andthe wrap up 49
- 49. Having a strongprofessional network and good reputation is invaluable 50 Both before and after the exit
- 50. Build your companyas if you were to work there until the end of your life. Sell it as if you were to sell it to your best friend. 51
- 51. Good luck ingrowing your own businesses (even if your ownership share is very small)! Have a great exit and a life afterwards, if it’s your decision. 52 Thank You!