Top 10 Learnings On What Getting Acquired is Like with Steve Mitzenmacher, Former VP Corp Dev, Own

I am watching deals happen where the absolute bare minimum number of shareholders approve the deal. And when we grew up, when I grew up, I was taught back in the day, listen, no matter what the documents say, no matter what the certificate says, almost every acquirer wants close to 100% approval to avoid liabilities and headaches. I've seen 2 deals recently and I had a material ownership. I wasn't even asked for a consent. And I watched another one where the founders made a lot and the investors didn't. That happens. This isn't a criticism, right? But it was interesting because it was a big acquirer. They needed 80.1% approval and that's all they got. And it took a month. It wasn't even a day. It took forever. My point is they took the risk in these deals, right? Is that more common? Can I get away with the absolute bare minimum today?

Yeah, I think so. The unfortunate aspect of how the world has changed in terms of the scope of who is investing and how many investors are participating as the the private market has evolved over the last 20 years and this class of prosumer investors has emerged beyond— back in the day, you just didn't have the crazy cap tables that you have nowadays to deal with. Hello everyone. It's wonderful to be here. I am Steve Mützenmacher, and today I'm excited to share with you the 10 things no one ever tells you about getting acquired for $1 or $1.5 billion. Over the years, I've led corporate development for multiple public technology companies, sitting on both sides the M&A table, primarily as an acquirer, but more recently as the acquiree. Throughout these experiences, I've learned some really hard-hitting lessons, insights that you won't typically find in the M&A playbook. And so today I'm going to share the realities of getting acquired, the things that can make or break your deal, the hidden challenges no one talks about, and how to set yourself up for success. So Let's take a moment to talk about the odds of actually closing a deal. The reality is exits are very rare. There's a bunch of coverage about this last week. Bloomberg ran an article about the 1,200 zombie corns, which is a new addition to the corn suffix, a little less glamorous use of it. In the 2021 class of 350 unicorns, there have only been 15 total exits realized. Even worse, there's 1,200 total unicorns still waiting for an exit. Along with that is some data that was published by Carta. Jason, I think you had highlighted this on some of your recent coverage. The vast majority of startups will never see an acquisition offer. And even among those that do, many of those deals will fall apart before the finish line. Why is that? Because M&A isn't just about having a great company. It's about being at the right place at the right time, and then being able to successfully navigate an incredibly complex process where the buyer's motivations, internal dynamics, and constraints matter just as much as you and your company and what you've built. So many founders and executives assume that once an offer is on the table, it's just a matter of finishing some paperwork. But the truth is deals collapse all the time on the inside due to misalignments on valuation, surprises in diligence, or just the shifting priorities that can happen within the acquiring company. That's why it's crucial to really understand how the buyers think, what drives their decisions, and how to proactively manage the process. You often only get one shot in an acquisition, so you can't afford to be unprepared or assume that things will just work out.

Hey Steve, before we get into it, I'll probably have to refrain from peppering you with too many questions, but one interesting— because you've been on both sides of it, you have been on the buyer side for folks, corporate development. These guys are in charge of a bunch of things, but it's really buying startups, which we can talk about. But you've done it at public companies and now you've been a target, right? You've been on the other side at Own bought for almost $2 billion, which is fun. On the odds question, here's the weird thing. I've been acquired twice as a founder, but when I was at Adobe on the other side, Okay. The surprising thing to me was the list. And what I mean is, yes, the odds statistically are very low, right? But they're actually both worse and better than it looks in this experience. And what I mean was, when I was there, there were 3 business units and everyone had an M&A list. Okay. And there were like big ones, the billion-dollar-plus deals and tuck-ins. Okay. And the VP, the SVPs, the EVPs made their list. And I'll tell you, the thing was They were weird. Like I knew the document space really well. And I was like, what about Dropbox guys? Those guys seem to be doing well, but they had a very strong opinion in the space of a list. The list could be argued and debated. But what I mean is if you're on the list, your odds are higher. If you're off the list, even if you're the best idea in the world for Salesforce or whomever, you may not ever even have a conversation. If you make more sense than someone on the list. That's a totally weird thing about the odds. Is that consistent with your experience that there's folks on and off the list when the list could be almost infinitely long?

Yeah, no, I think that's absolutely right. We, you do the best that you can with the, the visibility that you have, but I've been in organizations where I was a Corp Dev team of 1, or maybe I was lucky and I was a Corp Dev team of 4 or 5 for these organizations, but it's all about that, how much visibility you have, how much you can really do those sweeps. And then once you do, yeah, you have these individuals that have these formed points of view, right or wrong, to manage around. And so you on the outside, it's like the unfortunate thing that happens when you're trying to get hired, right? Like you might think you're the best candidate in the world, but some company might not ever find you. Or if they did find you, there's a whole bunch of other candidates out there that they might just determine are better.

So many candidates, right? So, and yeah, I remember when I bought— I know I would keep When I brought up Dropbox as an idea, it was too late. It was too big, right? They wanted to buy a Dropbox competitor, an adjacent player, right? And interestingly, why do they want to buy them? One reason was the CEO had been a VP there. And it wasn't just the obvious reasons. It was trust. It was familiarity. We knew him. And maybe that's a safer play, bringing someone back into the fold than some random thing we don't understand. Relationship, you'll get into a relationship. The way they work, it's really quirky though.

Yeah, no, it's really quirky, but they're so important in M&A.

They're so important just if for nothing else to de-risk things.

Yeah, we'll talk about that more, but it is not just a technology play or a product play. There are so many other factors that can go in, whether it's the finance side, the people side. You're right. It's a multi-pronged beast.

All right. Keep going. I just wanted to share this list thing people don't get. I didn't get as a founder that there are these lists, right? And in some ways, if you really want to get acquired, if you're not on the list, it's harder.

If you've never been through an M&A process, it's easy to assume that everything is rational and structured and driven by pure business logic. But the truth is, as Jason suggested, it's, it can be very messy, political, and filled with unspoken agendas. First, it's important to understand that inside the acquiring company, there's many different stakeholders. M&A decisions aren't always about the acquiring company needing your business. It might be a defensive play to keep you out of competitors' hands. Other times they're making a bet on very long-term potential rather than immediate value. So really understanding the hidden drivers behind the rationale for your deal can be incredibly powerful information to have for you to navigate the negotiations more effectively at each stage of the process. In M&A, the game behind the game often matters more as much as the deal itself. And that's what we call it, the inside baseball for how the buyer is driving the transaction. We're going to talk now in terms of the lessons, but let's start with that pre-LOI phase, the time before you've ever received a letter of intent and might not even know you are on the list. And this stage is critical because it could set the foundation for everything that follows. So number 1, be prepared. Acquisitions don't happen overnight. Companies that get acquired success— get acquired successfully aren't scrambling to clean up their financials when the offers arrive. Next up is this concept, uh, of lines, not dots. One of the biggest myths in M&A is that the M&A buyer will suddenly appear out of nowhere, uh, knocking on your door. And in reality, my job was to track companies for years. I had my own proprietary little instance of Salesforce that we managed just like you would, like a prospect pipeline. We tracked thousands of companies over many years in terms of understanding their progress, their traction, how the leadership team has evolved. And we'll really want to understand that before we ever make a move as a corp dev buyer. So it's why the relationships matter. I say you never want the first time you talk to a potential acquirer when you're ready to sell.

Yeah, there's always, I say always take one call a week. If for some, like it, you just, and you always learn something right from corporate development. I think you always learn something no matter what. I'm not saying you have to take the junior analyst at the PE firm call, but if someone from Corp Dev from from Salesforce or Informatica wants to talk to you, even if they're one year outta school, take the call. Just end it at 30 minutes and don't do any follow-up. You don't have to do any follow-up. You don't have to send them any data. You don't have to do anything. You can just be kind and just say, Steve, I love the call. I'm sorry, I'm too overloaded to send that follow-up or do another call, but let's talk down the road. Just be nice. You'll learn something and you can always— my learning is when you get that person on the call, you can always, if you share 20 minutes or 15 minutes, you can have an ask back. So Steve, how is Adobe thinking about the space? How, what do you, what have you learned? What is Informatica thinking? What is Own thinking? You're always going to get a nugget if you just ask the Columbo question. You don't have to be, you just, what, how are you thinking about the space? You may just hear the thing, build, buy, or partner. They want to do something fast. You may hear, honestly, my bot, we're just getting to know the space, right? And that's, there's like a lot of truth in that. Right? You'll get, even at bare minimum, you'll learn, that's your job is to know these things, right?

Yeah, that's great. And so the last one is very clearly question mark, trust the process with a question mark. M&A is messy. Yes, there is a process, but it's never as straightforward as it looks on my, on my little chevron chart. So there'll be unexpected delays, shifting priorities, and moments where you feel like it's slipping away. And the truth is, while Corp Dev will have that structured playbook, you need to understand that process just as well. You need to know when to push. You need to know when to hold firm and when to walk away if the deal or the timeline isn't meeting your needs. Your ability to navigate and help manage and control the uncertainty and stay disciplined through the ups and downs of the process can determine whether the deal gets done on the right terms or will fall apart entirely. So that's before the LOI. Now let's move on to that exciting time of you've received an LOI and you're in the thick of it. This period while you're, you know, first received the offer, going through the detailed due diligence and ultimately negotiating the definitive agreement is where deals can really gain momentum or potentially fall apart. So first up, it's a two-way street. So While it's easy to feel like the acquirer holds all the power in an M&A deal, that's not really the case, right? My job as the corp dev leader is to land this thing, and I have to make sure you're a willing participant in that process. So the buyer is just as dependent as you are on them, and due diligence is a two-way process. Yes, you are being evaluated, but you should also be evaluating them. What's their track record with acquisitions? How do they handle integration? What's their culture really like? And especially if there's a significant amount of the deal consideration that involves stock, you're not just selling your company, you're trading it for a piece of theirs and what the investment of your future time will actually turn into. So understanding what you're getting into beyond the financials is really critical during this stage. Next up, manage expectations. So deals always take longer than expected. Your team, as it grows, uh, of who's involved in the process, will have lots of questions. Externally, the acquirer will raise our concerns, surprises will come up. So the most important thing about keeping a deal on track is being clear, consistent, honest in communications. Overpromising, uh, creating false expectations just kills trust and can absolutely kill a deal. So being transparent about risks, integration challenges, realistic projections that you're signing up to. We don't expect perfection as the acquirer, but we really value and expect honesty. So if there's one thing that can kill a deal, it's a big surprise in diligence. And so the more proactively you manage expectations, communicate clearly and honestly, the smoother your deal will go. And the last one is leverage the last mile. So I think, again, back to that point earlier about two-way street, the closer you get to the final parts of the agreement, you actually have massive leverage if you know how to use it in those final stages. And being very strategic about how you negotiate some of the critical terms in a deal, retention bonuses for employees, integration commitments, or deal structure optimizations, being very strategic about finding the timing to do that and working with your advisors and the rest to do that.

Let me ask you a question on this, Steve, based on all your experience, and I can share some of mine after, but it's less than yours. How much can you push back on price and how many times, how many rounds can you push back on price?

So what I would say is headline price at those final stages, like none.

None at the final stage.

None at the final stage.

What about pre-LOI? What about pre-LOI?

When you get an offer. So pre-LOI, look, there's realistically a lot of room that you don't have to give it all away. And depending on what kind of deal it is and the rest, but what I can guarantee you is the first offer that you get in that first draft of the LOI that you get, is never the top end of the number that I've never gone out to, to my approval committee for that hunting license to go explore a deal. Now, whether it's a 30% premium to that, a 50% premium, 100% premium to that, there are a lot of factors that will determine my strategy around what my first offer is versus what my walkaway number will end up being. Oh yeah, you can pretty much guarantee that first number is never what anybody really expects as the final. Now, again, there are going to be a lot of parts that move back and forth depending on how much upfront, how much is held back, how much is cash, how much is stock, right? There's a lot of different levers that could swing how much room there is. Yeah, but like any good negotiator, right, there's not an infinite number of turns. And there's probably not more than somewhere between 3 and 5, depending on—

more than I would have guessed, 3 and 5.

Yeah, yeah, for sure. And price, yeah, again, typically it's I'll put it out an offer, they'll give a counter, I'll give a counter back. That's what I'm counting as 3. And then the question, yeah, the second counter, you're not going to usually get to a third back and forth counter if you're that far apart. Again, something probably pretty meaningful. And the question of after that second counter, I'm calling contestant number 2 and getting a feel for what will we have to trade off to go to our number 2 target versus the price I could, I think I can get them for.

Yeah, I find founders just, especially first-time founders, that dynamic, it's something they don't read properly. Steve calls you up, you have a conversation, they offer you $100 million for your startup. You, a lot, there's certain Machiavellian founders that it's all a game, right? And more power to them. I wish, but a lot of folks take it very literally. I find they're like, Steve said $100 million. I'm not, I'm out. I literally had this conversation a couple of weeks ago with some founders who were just out from an offer. And I'm like, I don't know, man, you're pretty good companies. We don't, I get a couple of takeaways. One, I know you wouldn't use these terms, but for corporate development, their job's a weird one. On the one hand, they're playing a bit of a price game. It's part of their job. It's part of their job to be a buffer from the operating executive sometimes. So the CEO or the EDP, it is basically the job, be the buffer, be the buffer so that, be the realizing, but on the Keep them clean.

That's how you use that line all the time. I'm here to keep you clean.

Realize that. Keep you clean.

Yeah. Yeah.

But on the other hand, Corp Dev's weird. So they'll feel like they're beating you up on price, but then if the deal doesn't close, they don't, they get an L. It's a weird, so they're both, they feel when you're talking with these executives in the beginning, it's really nice. The first discovery call I find, and then when you get close, it can feel frustrating because you feel beat down on price. And I'll share a couple stories. I don't have the answers, but just realize they also want to get the deal done at the same time. So just listen. And be nice. Related question. Okay. So you said 5 go-rounds max, but really that means I think founders, roughly speaking, can negotiate price twice, right? That's the maximum they can. That's my experience. If it's truly a lowball because it's a game, I say almost ignore it, be nice, but say, listen, $100 million. But Steve, we're at $80 million growing 100%. I'm not like, I appreciate you, but that—

let me start by saying I really screwed up if I dropped that $100 million in front of you and I haven't done some bit of like socialization. So I know before I drop that thing in front of you, I gotta know I'm like within spitting distance, I'm in a ballpark that we're not wasting time. Me and my team, like we've done enough of that work to hopefully have a degree of freedom of landing zone where we think will be appropriate, that, that will be part of the exercise. And that's usually good signaling for you to start getting serious and getting ready when you start getting some of those questions. Now, hopefully my job, like I haven't done it so obviously that I've, again, through those multiple meetings over a period of time, teased it out of you so that to some extent, by the time we've called and said, we're ready to deliver this to you, it is still a bit of a surprise. It's not been totally, because again, if, if I've given you too much time that way, you've gone out and shopped it to my 3 other competitors and sometimes given you too much time.

So not all founders are shoppers, but sometimes they are, right? Let me ask you 2 follow-up questions. The last round as an anchor. I watched an investment go through a very interesting M&A process recently, which is this company's cash flow positive. When you're there, how do you— if a company's doing well and then if it's not doing well, how do you think of the last round price as an anchor for valuation?

I mean, there's a lot of variables that will play into that in terms of like where the market is, where that company is, where you are. But yeah, I'll be very honest. Usually it's a pretty big anchor. We know that unless there are material extenuating circumstances, the entity is hobbled and kneecapped in some way, that all that money that's in that player, assuming it's smart money, that they're not going to do anything dumb. And if they see that performance of that business and they paid what they paid at that time. Now, again, we've had some, we have had some of those weird discontinuities, right? When you go from a world where everybody's willing to You know, fund things at 30 times and then you have this massive correction that takes it down to 8 times. Like there's a lot of discontinuity through the system that has to still work its way through to adjust to that. And that might be the example, right? These sophisticated buyers might just be feeling like, hey, that discontinuity, if they haven't internalized it, that's just the new reality. And too bad that you raised all that money at that grossly inflated price, 10% is better, is like what current market is the best you can do. And those kinds of things happen. But again, you would've thought that they would've at least communicated that message in a way that, that, that didn't leave it so shocking for how you were trying to grok where that, where that big mismatch on value was being placed.

The good reminder is that even today, if a company is doing well, the last round is a floor, it's an anchor, and you have to be— corporate dev wants the deal to close and you can offer anything you want, But it is a real, it's a real point, right? If you're doing well and the last round isn't an insane price, it's gone. If the investors don't make a profit, it's tough to get them on board, right? If there's no reason to do the deal, right? Let me ask you two other questions on this. Something that's changed for me in M&A that I've watched, and granted, this is with companies that aren't absolute S-tier, right? But I am watching deals happen where the absolute bare minimum number of shareholders approve the deal. And when we grew up, when I grew up, I was taught back in the day, listen, no matter what the documents say, no matter what the certificate says, no matter what the— almost every acquirer wants close to 100% approval to avoid liabilities and headaches. I've seen 2 deals recently that were overall, and I had a material ownership, I wasn't even asked for a consent. And I watched another one where the founders made a lot and the investors didn't. That happens. This isn't a criticism, right? But it was interesting because it was a big acquirer. They needed 80.1% approval and that's all they got. And it took a month. It wasn't even a day. It took forever. My point is they took the risk in these deals, right? Is that more common? Can I get away with the absolute bare minimum today?

Yeah, I think so. The unfortunate aspect of how the world has changed in terms of the scope of who is investing and how many investors are participating as the the private market has evolved over the last 20 years and this class of prosumer investors has emerged beyond— back in the day, you just didn't have the crazy cap tables that you have nowadays to deal with.

Okay. One last one. I could ask you 50, then I'll let you finish and then I might ask you more, but on the two-way street and the rounds of negotiation, how big a deal is it walking away from that second offer? Obviously it's an issue, right? It's an issue, but in terms of process, if the offer just isn't good enough, right? Is it, and you walk away kindly, does that kill the deal? Does it not kill the deal? Not what you're learning on all of this stuff from walking away kindly.

It's a very strong, it depends. But again, you have to know that, that back to your point before about my job is to get the deals done.

Yeah.

I don't ever go in without some form of contingencies. So again, the risk you run and you've— I'm like, I could like quote things that you've written about. This is once you walk, just remember you might never get a second call from me or from anybody else. And then you're back to the 2% odd games.

Yeah.

That's the internal risk that, you know, you as the founder take.

That's a good summary. Thank you. Yeah.

All right. Okay. We're now in the home stretch, definitive agreement to close. But remember, just because you've signed the definitive agreement doesn't mean that it's over. And the time between DA and closing can be just as tricky as the prior stages. So first, deals aren't won at the press release. This is one of my favorite little quotes. Signing the deal might feel like crossing the finish line, but in reality, it's like just the starting point of some of the really hard work. So to many founders who celebrate too early, they think their work is done once you've done that signature. But the hardest part isn't about getting acquired, it's what comes next, the integration. And as a corp dev leader, I am very involved in the integration process and will tell you that M&A graveyard are filled with deals that looked great on the hunting license presentation or the press release announcing it. but then totally crumbled in execution. Culture clashes, leadership misalignment, integration missteps can turn multi-hundred million dollar, billion dollar deals into the cautionary tale. So if you want your company to thrive post-acquisition, you can't check out after the announcement. Now, even though I say that integration was this moment at the— that you really get serious about at the DA. Integration should have really started long ago during due diligence, and I think it's one of the biggest mistakes that gets made in M&A is you treat due diligence as just this kind of legal and financial exercise. Really, it's the first steps of integration planning where, as you understand the business, what you're really thinking about is how are these functions going to work together once the deal closes. When done right, early integration planning minimizes disruptions. It will retain the key talent and really accelerate the value of the deal. And then the last thing I'll say during this phase as kind of founders and leaders is the importance of protecting your people. M&A isn't just about code and revenue numbers. It's about the people. Prioritizing your employees during the transition, they're what made your company valuable in the first place. And the honest thing is that employees, you know, might not assume when they read the press release that it's a great thing that they've been acquired. They're going to start to wonder, what does it mean for me? And fear, uncertainty, and lack of clarity. And to be honest, even though I thought that and understood it on one side of the deal, having done 20-plus years of being a buyer, I really realized that being on the inside and owned—

Very different.

When I was one of those people saying, what does this mean for me? You know, what changes the same? And what does this mean to my career?

For a lot of deals I've done recently, I've done special carve-outs for the employees that were not astronomical, right? But were material and the target in essence paid for them, right?

Exactly.

If you're nice about it, you're not going to get a lot of argument and acceptance for jerks, but you could make your teams so much more money if you do it. It's one example, but there are ways to do things that won't create huge drama. But man, when the LOI is signed, it gets rigid, doesn't it?

Oh yeah, it is. It is truly locked.

I think even the best acquirers don't always know who the special people on your team are.

For sure we don't.

Absolutely.

We might know some of the headlines and we have to do that trust of working with you to dig under the covers and understand from you. And I'll usually position it like, hey, you're like, you're digging your own grave here to some extent. So help me out. Help me help you. You tell me who your real difference makers are, who your 10xers are, so that we can be really smart about deploying the dollars that will help you be really successful, optimize the chance for success, especially in that like runway period of where we get you to self-sufficiency and take off on your own.

Yeah, I find most acquirers will definitely try to figure out who the top 5 to 7 engineers are. That's on every checklist. Okay, who's the most important folks on the dev team? But the other folks that are the glue of your company, you have to be their champions and you got to do it before the LOI sign.

So now bonus, um, in my— Dave Kellogg, who I know taught me early in my career about the important rule of 3. So I struggled with a list of 10, how to fit Dave Kellogg's rule of 3. So then I had a bonus. After the close, the most important thing to realize is, all right, it gets real. The honeymoon is over. So for all the optimism. That exists when the acquisition process has started and gotten to those major milestones. When you are deep in integration, once the press release is long an afterthought and the executive quotes that were full of excitement have drifted off, reality sets in. And that's when, as a part of the organization, everything, everything gets very real again about the competing priorities, the operational challenges, the culture clashes. That will start to emerge. The truth is post-acquisition integration is really hard, really unglamorous. Cultures don't merge overnight. A lot of the people will resist the change. You'll find where business units have very different and misaligned incentives. So the key to surviving this phase is finding ways to get to alignment and having massive adaptability to ensure that both sides are committed, to working through the friction instead of fighting against it.

Thanks again for the time, man.

This was great.

Awesome stuff.

Thank you everyone.

Talk to you soon.