How To Survive An Acquisition And Live Profitably Ever After

A clutch of billion-dollar startups are bent on acquiring talent and tech they don't want to build from scratch. Fast Company asked both a buyer (Salesforce) and a seller (Wibiya, bought by Conduit) to share some best practices for acquiring, merging, and becoming more profitable (and happier) than ever.

Though the process is full of balance sheets, business plans, and more back and forth than a tennis match, Sean Whiteley likens the process of one company acquiring another to dating.

He should know. Currently the senior vice president and general manager of Salesforce'sDo.com, Whiteley was previously cofounder of Keiden, which became part of the Salesforce family (as its second official acquisition) back in 2007, after attracting the larger company with its promise to marry the world of online ads and customer relationship management.

Five years and 20 more companies later--including its recent $689 million grab for BuddyMedia--Salesforce is growing through buyouts at a fast clip. Whiteley tells Fast Company that each experience has served to make Salesforce "a machine" at working through the kinks, fits, and starts that strike fear in the hearts of many an entrepreneur faced with the decision to sell. The scenario is likely to become more and more common, thanks to the rise of billion dollar startups bent on acquiring talent and tech they don't want to build from scratch.

Being acquired doesn’t have to mean selling out, Whiteley notes. This year, in addition to BuddyMedia, Salesforce added Do.com (formerly Manymoon), Rypple , and Desk.com (formerly Assistly) all of which Whiteley says have maintained their own separate culture within Salesforce, from individual company values to the kind of energy and enthusiasm unique to startups. "Just look at all founders and CEOs [from acquired companies] that are all still here. It's a great trend in terms of people finding great homes," says Whiteley.

Find Great People

"We are not buying technology; we are good at that," says Whiteley. But what is compelling --here’s the dating analogy again--are the people behind the platforms, apps, and widgets. "There are some you turn away because like dating, it doesn’t always work out,” says Whiteley. What’s more, he says, there has to be a fit between the executives at the acquiring company and the founders of the startup. “Both need to be behind the macro-strategy of the two companies combining,” he explains. (Think Amazon's gobble of Zappos and the two peacefully growing like e-commerce weeds).

Give Them Resources

Whiteley observes that most small companies by nature are focused on one solution. "They do it well because they are agile and not trying to do everything," he says. The downside of this, as it was at Manymoon before Salesforce swooped in, is that the engineering team was tapped out trying to adapt its features to different platforms and browsers. Whiteley says Salesforce was attracted by the potential size of the market for Manymoon's productivity app. "We were able to increase the size of the team and because we are good at security, we brought integrity to their vision," he points out.

Keep Them Talking

After 20+ buys, Salesforce is well attuned to the "hump at the beginning to integrate the back office," says Whiteley. Now with 8,000 employees globally, Whiteley says Salesforce has continued to keep communication nimble in two ways. One is through the company’s internal social network Chatter, which works a lot like Facebook. Used to "cross-pollinate innovation," Whitely says its a way for all staff to see presentations, data, and status updates that are most relevant to their work.

He says quarterly business reviews and monthly meetings are another way to check in and see if the separate divisions are meeting key performance indicators and stay on track with the overall mission and vision of the company.

For Startups

Startups are aware that they often lack the resources and processes to get them to the next level. It’s been a year since Dror Ceder, a founder of Wibiya, became an independently owned subsidiary of a division of Israel’s largest Internet company, Conduit. Before that, it was clear to Ceder that Wibiya’s free online toolbar, which allows publishers to integrate popular apps into their websites, would need to either look for a round of funding or hook up with another company in order to scale.

Keep Momentum

"We were in talks with three different companies," Ceder tells Fast Company, "two from the U.S. and Conduit." What concerned him most wasn’t the money (Wibiya would eventually sell for $45 million), but momentum. "We were agile and quick and we wanted to keep that momentum alive," he says. A meeting between Wibiya's cofounder Daniel Tal and Conduit cofounders Dror Erez and Gaby Bilcyzk over a burger changed the game. "It took five minutes to understand the synergy," Ceder says.

"The vision of Conduit's founders was a good fit to our vision and we didn't feel like we'd get eaten up by a big company. [Conduit CEO Ronen Shilo] sees us as an entity that is free and flexible," says Ceder.

Take Up Space

Wibiya may be a separate entity, but Conduit created an entire new space within its own office to accommodate the staff. Though Ceder says the space is wide open, "We really tried to keep atmosphere of the team in startup mode. We have scrum meetings and a small guerrilla team that helps us grow but keep momentum." The advantage to bunking with the bigger company? Chit chat. "You give and get inspiration and feed each other some great ideas," he says. And having cleaning staff come in four times a week is not too shabby, either.

Compromise

"Ownership is not something you let go of after you get acquired," says Ceder. Another link in the chain of command shouldn't be a signal to put up and shut up. "You should say what you think and fight for it, but also give effort to connect with a different division," he explains.

Ceder says the negotiating phase ("Like a guy chasing a girl," he notes) and adapting to acquisition, is a roller coaster. "Ninety percent of the ups and downs are in your head," he says. "A big part of these deals is emotional intuition. When someone wants to invest they are doing it because they are hoping for a return, but there is a risk." Nevertheless, giving up some control has paid off. He advises to take the long view. "In the short run, it might cost more, but you learn a lot along the way."

[Image: Masson via Shutterstock]

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