I would like to offer some free business advice to people who are considering selling something they’ve created.
First, if the buyer insists you don’t talk to any other bidders, you are being screwed. They only do this because they don’t want you to find the market-clearing price.
Do you think when Microsoft called LinkedIn and said, “We want to buy you for $26B,” and they replied, “Sure! That sounds good.”
If you’re very lucky, you get to work with a bank like Qatalyst, which says, “That’s a lovely offer, let’s see who else would be interested.”
Ask yourself why someone wants to buy you? Who else might have the same motivations? That begins a process in which a wide array of parties review the deal.
If you don’t have the connections or a bank to help you, just email the CEOs of other companies that might be interested. Say: “XYZ wants to buy me for $Y dollars. Is that something you’d also be interested in?”
Now you’re creating a market.
Remember that you’re doing this for the first time, and on the other side of the table, they’ve done dozens of deals.
It really pains me to see WordPress-adjacent companies get taken advantage of by sophisticated financial and corpdev players who strong-arm them into not shopping their deal.
A confident buyer doesn’t care if you talk to others because they know they can offer you the best deal, which usually combines money with what happens to the business after it’s sold. This is the magic of Berkshire Hathaway.
Warren Buffett doesn’t care if you talk to other bidders; in fact, he wants you to, so you see why he’s the better outcome for your business if you want to sell it.
It’s tempting to want to celebrate every time a creator sells something. Say it’s good for the community. But if they didn’t sell it through a fair process, it’s more likely they were taken advantage of, and that saddens me.
For public companies, failing to follow the process I describe above can constitute a breach of your fiduciary duty to shareholders and expose you to legal action. But there aren’t any such rules for private entities, which is why they get rolled over so often.
