The Downside of an Acquisition: How to Navigate Your Career and Life Better than I Did
April 5, 2018
Be authentic and do what you feel is right, even if it means upsetting your boss.
For millions of people, it’s the big dream: Join a small startup. Build it into a powerhouse. Get acquired by a massive corporation — and enter a whole new tax bracket.
But all too often when dreams like that come true, they turn into nightmares. That’s what happened to me. I was the fifth employee (the second after our three co-founders) of a business that grew to a staff of 85 before being bought out by one of the largest chains in the nation. For almost everyone in our startup, the acquisition was a disaster.
My journey included some highs, such as a celebratory moment in which some money hit my bank account. But the lows were much bigger, culminating in my sobbing in a parking lot.
Now, with the benefits of hindsight, I can see clearly what went wrong, including the mistakes I made and the warning signs I missed.
I’m sharing this as a cautionary tale for all sides in an acquisition. Here’s how to avoid the big pitfalls that turn excellent, loyal employees into miserable people looking for a way out. (Note: While this entire story is true, I’ll avoid naming the companies involved.)
I also went into details and answered a couple of questions about the acquisition on the Make It Happen podcast. Listen below or subscribe.
Startups and the team mentality
We were a great group of men and women working our asses off to build the company. A workplace culture like that can attract and retain the most committed, hard-working folks who believe in what the brand can become. We were driven primarily by a goal of achieving something great as a team, rather than by our own individual achievements.
It was succeeding. We made the business one of the fastest-growing in our major U.S. east coast city, at a rate of 30-60% each year. The business journal named us one of the “best places to work” for several years.
Seven years in, the phones started ringing. Competitors were looking to merge with us. Some of the biggest businesses in our field, including household names, wanted to purchase us. Private equity was interested.
At that point, two of our three co-founders owned 90% of the company. (The third had left the company and sold his shares.) They decided to enter into exclusive negotiations with a huge corporation.
Acquisition talks change everything
Suddenly, our team dynamic was gone. Our founders were handling discussions in secret, and we were given very little information.
We no longer felt that we were working to make the company great. Instead, we were working to maximize the valuation of the company, to make our founders wealthy. Sure, the rest of us stood to gain from the sale, but by miniscule amounts comparatively. That’s a dirty little secret of startups: generally, only the founders get rich in a buyout. So the mood in the office was no longer about all of us. It was about the rest of us working to enrich the two men at the top.
Given that employee morale is one of the most important drivers of success, allowing it to diminish was a bad call.
But there was a much bigger and more immediate problem. Suddenly, all the rules of our operations went out the window. The organic, constructive methods we had used for growth stopped mattering. We had a new directive: make the company’s numbers look as good as they possibly can, and then some.
When you artificially inflate numbers, someone pays the price
It’s a natural response. Our founders knew that our numbers and projections could drive up the perceived value of our business — which would, in turn, have a sizable impact on how much money ended up in their bank accounts.
As VP of sales, I was told to push extra hard on all of our metrics. We had to work around the clock, setting exceptionally high targets and exceeding them. We were told it would just be a few months, but the negotiations dragged on past two quarters. Our teams were exhausted and frustrated, and felt disrespected.
Demands to trim expenses made this problem even worse. Our engineers’ laptops were falling apart, so our CTO sought approval to buy new ones. The founders said no, and suggested the engineers start bringing in their personal laptops from home. To the rest of the staff, this seemed ridiculous. It was clear that our founders were going to get millions each in an acquisition. Was it really too much for them to approve new computers for the engineers, which would increase efficiency?
Things turned very bad, very quickly. Conversations in the office began to revolve around unanswered questions. Did the bosses, or the company considering buying us, understand that we were stretching our resources to make us look artificially better than we typically are? Did they realize we weren’t making the necessary investments into the business? What could we do about any of it?
We saw numerous red flags, but felt powerless to act. My team looked to me for leadership and guidance, and for an indication that everything was going to be OK. I did my best to provide all that. But I was given nothing to work with. Like my staff, I was kept in the dark.
I did repeatedly turn to one of our founders, who was leading the negotiations, to raise these concerns. He always responded with “trust me,” “don’t worry about it,” “I’ll take care of it,” and “things will work out once we get through this.” I hoped he was right.
Putting on a show
Then came the day I discovered that, of everyone in the company, I was the one being put into the worst position.
The corporation’s point person for the acquisition wanted to have individual meetings with some managers, including me. Our founders called us in to prepare us for the interviews. There, they gave us a rule: Don’t say anything that could screw this deal up. Don’t let on any weaknesses, either about yourself or about the company. We were to follow a template much like the typical interview question in which someone asks what your biggest weakness is and you say, “I work too hard.”
The bosses told me that I’d be under the most scrutiny because the company’s point person knew nothing about other aspects of the businesses, such as technology or operations, but did know about sales. I was instructed to act as though all of the high metrics and projections we were making at the time were what we expected to make well into the future.
When I went in for my meeting, the point person asked me, “So, what scares the hell out of you about this acquisition?”
I would have loved to be honest. I would have felt comfortable being honest. And I would have given a much better answer being honest. Being blunt is my style, and often pays off. But I kept to the script, and basically just said how great everything was.
That was a mistake, and the beginning of the end of my career at the company.
Later, that day, the point person told my founders that he didn’t have a good feeling about me. He probably sensed that I wasn’t being straightforward. When that news was then passed on to me, I felt like a casualty and started to grow a chip on my shoulder.
I was also getting afraid. Not just for myself, but for the company we had worked so hard to create. In a second conversation, the corporation’s point person told me a story that he took pride in. It was about a “big idea” he had for the company, involving vending machines. They flopped, wasting millions of dollars. “I cut bait and moved onto the next idea,” he said, adding with a laugh, “I still have a bunch of those dumb machines in my basement if you want one.”
“Holy shit,” I thought. “Did he just say that he had an idea, dumped millions of dollars into it, gave it one chance and then dropped it like a bad habit when it wasn’t immediately successful? Aren’t we an idea of his? Isn’t he dumping millions of dollars into us?” The hairs on the back of my neck stood up.
The idea that we could get dropped and be left without jobs became an even bigger concern when we were given contracts to sign. They stated that if the acquisition went through and we chose to stay, we would have to sign non-compete agreements. To some extent, this is normal. But the language was extreme.
The contracts effectively precluded us from working in our field again just about anywhere. They said we could not work for anyone who was ever a client of the corporation buying us. While this may sound reasonable, this corporation is a household name with big stores everywhere. Virtually everyone we could possibly work with had, at some point, bought something from one of these stores — and could be considered a “client.”
Clearly, these documents are written by lawyers to protect the company. But the broad language showed that they hadn’t given any thought to how employees would be affected.
We were told to hire lawyers, at our own expense of course, to look over the documents. But then what would we do? Fortunately, enough employees raised concerns that some changes were made.
It was a Friday morning. All the paperwork was done, we were told. Our founder who led the negotiations looked like he hadn’t slept in a month. Our other founder was staring at his computer screen, with his bank account open, just waiting to see the $3.4 million appear. (I had my account open as well. My influx would be about enough to cover credit card debt, a down payment on a house and the cost of my wedding coming up.)
Suddenly, a shout of glee came from his office. The deal was done. He couldn’t wipe the smile off his face, and I don’t blame him. Finally, there was a moment of celebration. Everyone walked around congratulating everyone else.
But we had no idea what was in store.
When acquisition talks ignore integration
I was tasked with integrating our sales operations with those of the larger company. That’s when I had two stark realizations. First, there was no plan in place to make this happen. In all the behind-the-scenes negotiations, no one had ever considered what it would actually take to mesh these two very different business operations. And second, the misconceptions went both ways. It wasn’t just that the company had an inaccurate understanding of us; we had an equally false understanding of them.
We offered services that they didn’t. We were told that this multi-billion-dollar company would make new business rain on us because their clients would want what we offered as well. That we’d suddenly enter into a bigger league and have more meetings, prospects, and buyers. But our founders had clearly never looked into this.
I was a 30-year-old guy who had figured out sales on my own. I was looking forward to learning from executives at this hugely successful company, who I assumed had all sorts of wisdom and recipes for success. But when I went into my first meeting with their sales management team, they had nothing to offer. Instead, they asked me: “What’s the plan? How are we going to blow this out of the water?” When I asked for their ideas, one responded, “You know your business better than we do, so you tell us.”
Stunned, I winged it. I developed a strategy, suggesting that we look at the corporation’s thousands of clients in our region, and rank them so we knew which were the top prospects. Using the data the corporation provided us, we could create a list and then launch a pilot program to reach out to the clients in that order. We’d coordinate to do introductions so that these established salespeople could explain to their clients that my company was brought in to serve other kinds of needs.
They gave the go-ahead, but no resources or support. And my sales team was still stretched to the gills. So I alone had to go through all the data and create the list. When I finished and presented it, one of their regional sales directors simply glanced it and said, “Let’s start with the top ten on this list.”
Now, sales reps from both teams needed guidance and a strategy for exactly how to reach out and what to do. After a lot of Redbull and sleepless nights, I had a plan that consisted of a detailed training manual, a commission structure, a contest with some pretty nice prizes, marketing materials and a detailed approach.
Unfortunately, it was doomed from the start.
First, the company’s data was filled with holes and inaccuracies. The number of employees many of these clients had were wrong. Contact information was wrong. Industry labels were off. Some of these “clients,” we’d later find out, had moved their business elsewhere long ago and didn’t want to be bothered.
And second, the strategy I presented involved sales reps using the corporation’s CRM, or Customer Resource Management system. No one told me that the sales teams were barely using their CRM. They didn’t like it and saw it more as a barrier to sales than an enabler. In all the talks about a buyout, no one had considered issues like integrating different databases into a single system we could all work with.
For all the practical and technical flaws that made these integration attempts flop, the biggest problem involved something that very often plagues mergers and acquisitions: culture.
My startup was scrappy. If something needed to be done, we figured it out together and took care of it. We had very little bureaucracy and red tape. We’d have a meeting on a Monday to develop a campaign, assign who would do what, and have it out the door by the end of the week.
Compared to us, our new corporate buyers were stunningly inefficient. Doing anything required a 15-step process with 20 people giving feedback and opinions, only to have whatever they eventually decided then go to other teams — design, legal, and more. It was considered lucky to get a campaign out the door within three to six months.
This difference can breed a different kind of culture. I mistakenly assumed that the corporation’s salespeople would be like mine — ready to take initiative, make changes, and build. But when you’re in a large corporation moving at this pace, there’s something to be said for having a comfortable position, making good money, and not sticking out. So people were more set in their ways.
These cultural differences also help explain why I didn’t belong, and why things turned ugly for me very quickly.
The emotional ride
When the integration was slow, with very few successes in the first several months, everyone needed someone to blame. There I was, a sitting duck.
I tried to play the corporate game — taking responsibility for things that weren’t my fault, being deferential to everyone, and asking for advice. When that didn’t work, I tried the opposite. I fought back against criticism, both verbally and in writing. No matter what I did, I couldn’t be heard.
I know, and believe, that it’s very important to own failures and mistakes. So as I write this, I’m not saying I’m blameless in the situation. On the contrary, I should have spoken up sooner. I should have seen the crash we were heading to and left the company sooner. Some of our best salespeople were already leaving, and miserable. The company had even decided to drop our CFO, one of our two founders. (The one who was watching his bank account on acquisition day.)
Still, leaving a job is never easy, particularly a small business you’ve loved being a part of. When I finally got the word that I would be replaced as head of sales of our operation, it was what I needed. I was too invested to make the decision to leave and needed it made for me.
My boss told me the company was letting me go and would give me some time to transition to the next person. On my way home, I pulled into a grocery store parking lot and called someone who I knew would understand and commiserate: the third original co-founder of our startup. He had left after a few years. And although he was no longer involved in the company, he hated the acquisition. He felt that his beautiful creation was losing what had made it so special. As we spoke, I lost it.
Then I called my wife. She was great as well, and tried to comfort me, reassuring me that we would be OK. I also called a couple of friends, one of whom came to meet me in the parking lot.
Fired, not fired
That night, my boss got in touch explaining that he had messed up. The corporation didn’t want to let me go altogether, they wanted to give me a different role — effectively, a demotion. He tried to convince me to take it. He said that if the corporation hired someone else to run sales, and that person failed, then I’d step back in and look like a hero.
He didn’t understand that I had no interest in seeing our startup fail, even as part of this larger corporation now. He was asking me to think of myself first; I was still thinking of the business first.
But I had to accept that the business was no more. It was time for me to leave. In making that decision, I felt like a weight was lifted off my shoulders. That chip was falling off.
A window opens
When you make a decision like that, it often truly is the case that new opportunities suddenly come your way.
I was almost instantly given a chance to move in a new direction, to join a company as a sales trainer. It was exciting and invigorating. Having this offer also helped me relax and feel confident as I prepared to leave.
Saying goodbye to our staff was one of the toughest moments of my life. I tried to hold back tears as I delivered a farewell speech. When the staff responded with a standing ovation, my tears started flowing. Lots of tears, lots of hugs.
What people said to me that day was humbling and powerful. And I encouraged them to keep moving in the right direction.
I’ll always feel a special connection with them. I remain in touch with many of them and am looking forward to them realizing their potential.
What I found out later
I took off a month to travel with my wife and then settled in at the new job. I also knew that I had to learn from my mistakes. So I did something unusual: I got in touch with the point person at the corporation that had let me go. The one who hadn’t liked me since our first meeting. I requested a meeting with him.
I came equipped with a list of 15 questions to go through. They were about things I could have done differently to lead to a different outcome. This led to one of the most important learning experiences of my career.
“Would you have been open to a meeting like this when I worked here?” I asked, keeping in mind that my boss had told me not to be honest with him — and to initiate no contact with him.
“Of course,” he answered. “Why wouldn’t I have? What would have been the risk? There are two possible outcomes. The first is that I would be open to your approach, we would make a connection, see eye to eye and ultimately have a healthy relationship moving forward. Win-win for everyone. The second is I would ream you out, tell (your boss) you went over his head and destroy your relationship with him and me. Let me ask you something. If that had happened would you have wanted to work for me?”
My answer was an obvious no. “Then,” he said, “you would have found out very early on in this relationship that this was not the right job for you and would have been able to make the appropriate decisions.” He was right.
I explained that the startup felt like my baby. That I had given my life to it, along with the other people who worked there. That if I had gotten fired, I would have been letting myself and the others down. But he told me, “John, the minute we allow our work to define who we are is the minute we have lost who we are.” He was right again.
Today, I’m happier than ever in my career and life. I run my own company , choose which projects to take on, travel to work with businesses, and deliver keynotes at conferences. I share my experiences, challenges and lessons via outlets like the Harvard Business Review , Forbes , Inc. , and social channels. (You can follow me on LinkedIn here .) I’ve also created a game-changing partnership with a millennial who I believe will be a future sales leader
Most importantly, my wife and I have started a family. We couldn’t be happier.
For startups and enterprises that are considering acquisitions, I have a crucial piece of advice: always have a point person on each end who is involved in the process and focused on integration. These two people together must be empowered with the authority to get things done. And top officials at both companies must get frequent updates about the challenges they’re facing.
And here’s my advice to everyone: no matter what field you’re in, and whether you’re at a startup, a giant corporation, or running your own operation, you’ll run into similar dynamics and challenges to those I’ve faced. Remain true to yourself. Your authenticity is a big part of what you have to offer. Being real is a big part of being successful.
Never forget that.
P.S. If you’re a founder or at an early stage company, check out episode 49 of the Make it Happen podcast with Tukan Das, CEO of Leadsift where we talk about getting your first 10 paying customers.