6 Things to Know Before Approaching an Acquirer
July 22, 2022 |
About this episode
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Touraj Parang has experienced the highs and lows of selling a company.
In 2009, Parang sold his first company, Jaxtr, for pennies on the dollar. He took the lessons he learned and joined Webs.com, where he helped Haroon Mokhtazarda sell his company for over $115 million.
Parang left Webs.com and joined GoDaddy as a leader in their acquisitions group, where they acquired dozens of companies during his tenure.
In the latest installment of Inside the Mind of An Acquirer, Parang shares how companies like GoDaddy acquire companies. In this episode, you’ll learn how to:
- Avoid the most common mistake made by first-time sellers.
- Generate more cash flow for your company during a down economy.
- Develop trusted relationships with acquirers years before selling.
- Utilize one little-known trick to increase your leverage in a negotiation.
- The ugly truth behind re-trading from a seasoned buyer.
- The single biggest reason deals fall apart during due diligence.
Check out our article on Knowing When To Cash Out.
And How To Get Your Biggest Customer To Acquire Your Business too.
Show Notes & Links
Touraj’s Book – Exit Path
Definitions
Letter of Intent (LOI): A letter of intent (LOI) is a document declaring the preliminary commitment of one party to do business with another. The letter outlines the chief terms of a prospective deal. Commonly used in major business transactions, LOIs are similar in content to term sheets. One major difference between the two, though, is that LOIs are presented in letter formats, while term sheets are listicle in nature.
Re-Trading: Re-trading is the practice of renegotiating the deal price of a company after the initial price and terms have been agreed to. This occurs when the buyer performs due diligence during negotiations and potential risks are uncovered during the process.
Accretive: By definition, in corporate finance, accretive acquisitions of assets or businesses must ultimately add more value to a company, than the expenditures associated with the acquisition. This can be due to the fact that the newly-acquired assets in question are purchased at a discount to their perceived current market value, or if the assets are expected to grow, as a direct result of the transaction.
Source: https://bit.ly/3aQdgG9
Preferred Preference: Preferred Preference means that amount equal to the sum of the Preferred Preference Per Share for all shares of Company Preferred Stock (including any rights convertible into, or exercisable or exchangeable for, shares of Company Preferred Stock on an as-converted, exercised, or exchanged basis) issued and outstanding immediately prior to the Effective Time, rounded to the nearest one hundredth (0.01) (with amounts 0.005 and above rounded up).
Source: https://bit.ly/3RSTtGH
Due-Diligence: Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.
Source: https://bit.ly/3yYDfo5
Venture Debt: Venture debt is a type of debt financing obtained by early-stage companies and startups. This type of debt financing is typically used as a complementary method to equity venture financing. Venture debt can be provided by both banks specializing in venture lending and non-bank lenders.
Source: https://bit.ly/3ISxMT0
Average Revenue Per Unit (ARPU): Average revenue per unit (ARPU) is an indicator of the profitability of a product based on the amount of money that is generated from each of its users or subscribers. It is a particularly useful measurement for companies in the telecommunications and media industries, which rely on subscribers or users.
Source: https://bit.ly/3OponTO
About Our Guest
Touraj Parang
Touraj Parang is a veteran Silicon Valley dealmaker. As a seasoned entrepreneur, investor, advisor, and M&A expert, he has sat in almost every seat around the table in Silicon Valley since late 1990s. Exit Path draws on his decades-long unique experience involving hundreds of M&A transactions, strategic partnerships, and venture capital investments totaling billions of dollars in aggregate value. Touraj also joined GoDaddy before its IPO to help build corporate and business development teams. He is currently the President and Chief Operating Officer at Serve Robotics, which he helped spin out of Uber, and an Operating Advisor at Pear VC, a leading early-stage venture capital firm. Touraj earned his JD from the Yale Law School and his AB in Philosophy and Economics from Stanford University.
