About a year ago, one of the entrepreneurs I interviewed sold his company to a larger company. As he was ready for an exit strategy, this was an excellent turn of events. Finding the right buyer and cutting a deal that works for both sides is difficult and complex. When it works out, the new and former owners are gushing with enthusiasm and best of friends.
As part of the acquisition, the buyer gave the entrepreneur incentives to stay on for years. Many acquirers create additional motivation for the owner of a small business to stay on. After all, the founder has the client contacts, the relationships with employees, and the vision that made the company successful in the first place. “If it’s not broken, don’t fix it,” you’ll hear the acquiring CEO say after the deal is inked. A founder that leaves too quickly can cause the energy, if not the key employees and clients, to spill out of a successful small company.
Just under a year after selling his company, this entrepreneur has no enthusiasm for the acquiring company’s management team. He is an employee of a bigger firm and they are his bosses. They have the vision. They set the objectives. And, from his point of view, they’re short sighted and just plain wrong. They’re interfering. They are changing his business model – the very model that made his business an attractive acquisition. He feels powerless. and despite the motivation to stay, he is sabotaging his employment by railing against the “powers that be.”
By surviving in the company one year after the acquisition, this entrepreneur was actually a long timer. Many of the founders I’ve known flee within months of selling their companies, no matter the incentives to stay and no matter the contract they signed with the acquiring company. Their job description changes, the corporate culture they built blends into that of the bigger company, visions clash, personalities chafe, and before long both the acquired and the acquirer are relieved when the relationship comes to an end.
The parent companies often absorb the acquisition in these cases. Two HR departments aren’t necessary. Accounting can be done from one organization. A single sales force can sell more products. And soon, the small company and its jobs are no more. Ultimately the revenue is dramatically reduced and just a ‘blip’ on the acquirer’s management reports.
Granted, small company acquisitions don’t always follow this story line. But very often, they do.