Ali Ghodsi advises founders on whether to tell co-founders about acquisition offers before evaluating them. He explains the political risks of early disclosure, then walks through how to rationally assess an offer by projecting growth scenarios and distinguishing between acquisitions of struggling versus thriving companies.
Chapters
For selling or not, I mean advice number 1, don't tell your co-founders if you have an offer, okay? Because there's going to be a lot of politics and they're going to have a lot of opinions, and you don't want to hear their opinions. It's really your decision. So if you get an acquisition offer as a CEO and you have co-founders, don't tell them? Again, in this lecture I'm just going to contradict everything I did and tell you to do the opposite. I told my co-founders it's a terrible idea, don't do that. They have a lot of opinions, okay? Even though you trust them? I trust them. But you don't trust them enough to tell them? Literally, I was like, since I trust them and we have this tight-knit group and we're so So I have to tell them this. And I told them, and then I didn't like what they were saying. So in my opinion, be very careful. If you end up not wanting to sell, or if you're not selling, be very, very careful. Because what if they're like, no, no, no, you're destroying the company. This is our only chance to sell. You have to sell it now. And you're like, no, I don't want to. That's a very tough spot to be in. Be very careful with that. How do co-founders have fights in that situation? Is it just might is right? The CEO makes the decision? No, it's siblings, right? It's very hard. That's why I'm saying don't do it. It's going to be very hard. You're going to get me into trouble soon. I'm going to lose my co-founder. So that's what I would say. I think a rational way of thinking about selling— there's many ways, I'm not going to give you all the answers— but a pretty rational way is to say, look at your growth rate and see how it's going. And if you just compound that for 3 years, where will you be in 3 years? You can do a best case, medium case, poor case scenario, and the acquisition offer better definitely beat the worst case scenario, right? Probably also the middle case scenario as well. Then you can decide what you want to do with your life. Do you want to do another one or not? But so this is a lesson for people who want to buy companies that I think most people who buy companies don't understand this. The founder is not going to sell it for the value it has today. They can just sit on their butts for 1 year and the growth rate will be this much, and with this multiple will be this much. So you have to pay a significant premium. There are 2 types of acquisitions. There are, in my opinion, there are acquisitions of companies that are kind of— it's not really working. And there are acquisitions of companies that are doing well. What I'm talking about is companies that are doing well. It's going well, it's growing. Then there's companies that you have to close doors and it is over. You have to then That's a different equation, and you only have this much time, and you have to find the best offer.
