Each of the leaders I spoke with had unique experiences, but as you can tell, there’s similarities in each acquisition that lead to a pretty crisp, clear set of heuristics for considering and preparing for a sale. These are the things to do as you entertain the idea, and as you go through the long, arduous process:
What a silly thing to have to remember to do, but how easy it is to skip: ask yourself why you are selling your company, and be honest in your answer. And then, as a constant reminder, write down your goal for the acquisition, put it on the wall, and live with it for a while.
Before you begin the process in-depth, create a plan for how your time will be spent; in the plan, address these points:
The form of the plan isn’t important—it can be bullet points on a list, post-it notes on your wall, or a written narrative—but you can start by answering questions like this:
You’ll need a team to support you in the process to advise on and handle specific topics, many of which are topics designers typically stray away from. Include people to cover these roles, and if you don’t already have people in your network like this, ask these questions as you recruit or hire them:
You’ll never really understand a company culture until you find yourself in it, but you can get to know the people you’ll be working with by interviewing them as much as possible.
I would recommend these explicit interview steps to include, likely after the LOI is signed but before getting too far into diligence.
It doesn’t need to be a complete client project, although that would be great; any project where you make things together will help you see how people think and act in a collaborative session. Some potential projects might include:
In all cases, consider using your designerly process, which probably includes collaborative sketching, dreaming, externalization, and deep dives that last more than an hour. Look for clues about how the acquirer acts during these meetings, and consider checklists like these:
One thing to try to observe during meetings with leadership is how people react to conflict or challenge. Push back (nicely!) on things they say, or question the root of their assertions; see how they respond. Find ways to provoke a rainy-day interaction, so you can see what happens when people aren’t on their best footing.
A big clue about how you’ll interact with a potential new management team will be how much time they are willing to give you. If the best they can do is a one-hour Zoom call, you can infer how difficult it’s going to be to get their attention when you really need it.
Since small, day-to-day interactions will have large impacts on sentiment, I would recommend doing your best to understand the details of what you and your team will experience by way of operations. Ask to speak with someone who can describe the mechanics of how their company runs, and consider prompting conversations around these questions:
What software is used, and what is the process, for…
Find out about approvals—what’s the process, who’s involved, how many people have to sign off, and how long these things take.
Make sure to learn about the different costs that you may not have been expecting, but asking things related to shared-services or overhead:
Make an effort to drop below the C-suite or executives and interview the people who actually do the project work. If the company already has designers, find some time with them. Try to ask questions about:
Before the LOI is in place, make sure you’ve pushed for the things that matter. Make sure you reflect on these things to see if they are important, and if they are, treat them as “first-class citizens” for negotiation, and get them in writing.
How much control are you really willing to give up? Consider these constraints, and work through the implications of your answers:
Yes / No / Negotiable | Ending the various experiences or traditions that we’ve established as a culture |
Yes / No / Negotiable | Being unable to start another consultancy for a minimum of _________ year/s after leaving the new company |
Yes / No / Negotiable | Being unable to recruit or work with your existing team for a minimum of _________ year/s after leaving the new company |
Yes / No / Negotiable | Being unable to recruit or work with your existing clients for a minimum of _________ year/s after leaving the new company |
Yes / No / Negotiable | Having a minimum of $_____________ set aside as a discretionary budget per year Appendix 203 |
Yes / No / Negotiable | Receiving a minimum of $_____________ in cash up front |
Yes / No / Negotiable | Working for a minimum of ___________ year/s at the new company |
Yes / No / Negotiable | Having my money tied to the retention of my team |
Yes / No / Negotiable | Giving a minimum of $_____________ retention bonuses to my team, which might come out of my own share of the sale |
Yes / No / Negotiable | Having my money tied to revenue that I need bring |
Yes / No / Negotiable | Having revenue defined as _____________________ |
Yes / No / Negotiable | Having my money tied to profit that I need to generate |
Yes / No / Negotiable | Having profit defined as _______________________ |
Yes / No / Negotiable | Giving up control to hire, fire, provide bonuses and raises at will |
Yes / No / Negotiable | Giving up control of the culture of my company |
Yes / No / Negotiable | Using buyer-procured technology, which may include spyware or trackers |
Yes / No / Negotiable | Having my team resourced to projects outside of my control |
Work through these scenarios with your lawyer, and make sure you’re clear about what happens in each case:; what happens if…
When you get to diligence, you’ll have to produce a large quantity of documents. Here’s a checklist of the things you’ll need to gather (at a minimum):
A buyer will look for:
A buyer will look for your SOW documents and a summary of the materials:
Client | Client name |
Project | Project name and description |
Date Signed | Date of signature |
Duration/End Date | Start and end date of project |
Payment Terms | Financial terms that override MSA defaults |
A buyer will look for your MSA documents, signed, as well as a summary of the materials:
Client | Client name |
Date Signed | Date of signature |
Date Expires | Date of expiration, previous or future |
Assignable? | Can the contract be assigned to the buyer as a result of the transaction, with or without approval from the client? |
Non-Competes? | Does the MSA reference specific clients by name that the buyer will not be able to work with? |
Default Payment Terms | Are there terms across all contracts? |
A buyer will look for your invoices, as well as a summary of the materials:
Invoice Number | Unique Invoice number |
Client | Client name |
Project | Project name and description |
Date Invoiced | Date the invoice was sent |
Date Due | Date payment was expected |
Received Due | Date payment was received, if any |
Amount | Total amount of invoice |
A buyer will look for:
A buyer will look for:
A buyer will look for:
Put these items in a single place (Dropbox, Google Drive, etc.), and track them in a spreadsheet, so you’ll be able to produce them quickly and without the added anxiety of organization during negotiation.
Every single person I spoke with who had a negative sale process attributed it, in small or large, to the lack of a clear plan for integration. I would recommend working in close collaboration with your buyer to create a plan that includes all of these things (which are, basically, every part of the business!).
What will change? | What will not change? | When will the changes happen? | Who is responsible for managing the changes? |
Titles of your team members | |||
Salaries of your team members | |||
Reporting structure |
What will change? | What will not change? | When will the changes happen? | Who is responsible for managing the changes? |
Business development team integration | |||
Day-to-day client leads for existing programs | |||
Day-to-day client leads for new programs | |||
Buyer’s access to your clients | |||
Your access to buyer’s clients | |||
How you write, negotiate, and sign contracts | |||
Your ability to access legal support | |||
MSA and SOW templates |
What will change? | What will not change? | When will the changes happen? | Who is responsible for managing the changes? |
What you sell | |||
How you sell it | |||
How you talk about your capabilities | |||
How much your services cost | |||
How many people work on a project | |||
What types of people work on a project |
What will change? | What will not change? | When will the changes happen? | Who is responsible for managing the changes? |
The hardware you use, and how you source it | |||
The infrastructure in your office | |||
The creative software you use, and how you source it | |||
The operations software your team will use (for expense reporting, requesting time off, etc.) | |||
The operations software you will use (for financial management, tracking performance, etc.) |
What will change? | What will not change? | When will the changes happen? | Who is responsible for managing the changes? |
How you recruit and advertise for new talent | |||
How you make an offer to a candidate and negotiate their terms | |||
How you onboard new employees | |||
How you manage performance issues | |||
How you compensate, and how much you compensate | |||
The ways you can reward strong effort or performance | |||
Training and education | |||
How you terminate staff | |||
Policies related to time off, holidays, and other perks | |||
How you bring on a contractor |
What will change? | What will not change? | When will the changes happen? | Who is responsible for managing the changes? |
How budgets work | |||
When budgeting cycles happen | |||
How you make small purchases | |||
How you make large purchases | |||
How you make crazy purchases, like sending the whole company on vacation |
What will change? | What will not change? | When will the changes happen? | Who is responsible for managing the changes? |
How snacks, drinks, and other conveniences are selected and ordered | |||
Where you office from | |||
Who pays the utilities, and how |
What will change? | What will not change? | When will the changes happen? | Who is responsible for managing the changes? |
Your website | |||
Your social media presence | |||
The company name, mark, aesthetic, and identity |
Be skeptical of the phrase “we’ll figure it out later,” and scenario-play the most important changes, to really think through how a change will work and feel.
Most importantly, write this integration plan down. And if parts of it are critical to your success, make those parts (or the whole thing) legally binding by including it in the sale agreement.
Most of the people I spoke with intended to take care of their team, but didn’t feel that they did enough to ensure that their employees and colleagues were treated with the respect they deserved; some expressed regret related to both financial and cultural outcomes. Here are some of the things you can do to ensure you take care of your team:
Even if you haven’t explicitly tied your personal compensation to the retention of your team, you’ll want them to stick around. When things get rough, you’ll need a way to motivate them, and while money isn’t everything, it can sometimes be enough to get you through a rough transitional period. Recall that a number of the stories you’ve read mentioned money that was promised but disappeared; you won’t be able to procure raises, bonuses, and an explicitly retention budget unless you argue for it up-front.
The secrecy of the sale process often ends in an abrupt announcement, after the sale is concluded. But imagine being on the receiving end of that; yesterday, you worked at one company, today, you work at another, and you had no say in the matter. The longer you can provide your team to come to terms with the change, the better. If you can bring a larger group into the conversation early, do it; as Chris Conley described, he actually handed the transactional reins over to his trusted team. In addition to signaling trust, this gave the team much longer to better consider the implications of the change and get ready for it.
There is typically a large announcement to the company after a deal closes, and then the team attempts to go back to business as usual. But it’s not usual, and a single meeting will not be enough for people to process the change. Hold multiple meetings to discuss the transaction, even weeks or months after the change has been initially communicated. Conduct small group meetings with key players from both your company and the buyer’s company, so they have opportunities to get to know one another. Anticipate the animosity that Maria described at Facebook, and do your best to head off cultural differences by creating social events for both teams to experience at once.
Above all, try to remind yourself that, while you’ve been living the realities of the transaction for almost a year, your team is brand new to the change. They need more than a day, or a few hours, to get to try on the idea.
Change is scary, and while it’s beneficial to verbally champion the new buyer, it’s also valuable for people to explore a more tempered reality; designers are particularly good at seeing through a veil of optimism. This means being clear about some of the trepidation you had and may continue to have, and describing the real risks and challenges that are on the horizon. Every person I spoke with described that the integration is going to be hard (or downright impossible), and that’s a good place to start this form of honest and earnest conversation.
If you’ve thoughtfully made up your mind to go down the process, it’s important to take care of your mental and physical health. You can’t make rational decisions if you’re a ball of anxiety, and the long hours of screen-time will take a toll on your body. And if you have family and friends supporting you, they’ll absorb your emotions, too. This process will eat you up if you let it. So, I would recommend you:
Put these things on your calendar or to-do list, or you won’t do them. Even hobbies that you regularly engage in will take the back burner as the excitement and anxiety of the deal progress. Make these things “first class citizens” in the context of your day.