The Finish Line
The Acquisition Process: Lessons Learned (Part 3)
Dear Fabulous Female Founders,
At long last, we’ve arrived at the stirring conclusion of my company’s acquisition story. You read (in Part 1: The Smell of Desperation) how a NYC-based investor offered up an attractive term sheet for 51% of Alta Bicycle Share while we hung on in the aftermath of our supplier filing for bankruptcy. Your heart ached reading how my 20-month-old broke his femur the night before I was to meet the Investor for the first time. In Part 2 (Haircuts and Lice), you were as puzzled as us to hear the supplier got purchased out of bankruptcy via a satellite phone in Madagascar. You laughed when I snagged a major concession while getting my hair de-loused, or maybe scoffed Duh! What did they think was going to happen? as we grew increasingly agitated by the Investor’s slicing, dicing, and delaying.
As the leaves turned yellow and red and the last few tomatoes failed to ripen, we signed the third or fourth purchase agreement iteration, thinking/hoping/praying this would be the last.
By this point, our supplier was back in action. The new owner signed revised supply agreements and invested in the software, leading to a sponsorship and expansion deal in Chicago. I flew out to the announcement event feeling strange, my head stuffed with knowledge and details not to be shared or expressed, my mind miles ahead of the present moment. Would the deal go through? When?
Alta in the Bardo
Just after the Chicago event, partner Michael gave up the title of President to the Investor, per the latest agreement. Surely that meant we were in the clear? Yet again, the deadline passed and the deal did not close.
After more negotiations, the next close date was set for early November, but how close were we really? No one seemed to know. I was still hosting a weekly call with the marketing team, coordinating with clients, signing checks, sending wires, and participating in this or that meeting. I tried to be patient, to live in the moment, to hold my head up high in this in-between state, simultaneously staying the course and preparing for massive change.
By this point, the Investor was regularly meeting with clients and staff. Media outlets reported things, often inaccurate. The deal had closed! (It hadn’t.) A new CEO had been hired. (Really?!) The new CEO would rescue us out of bankruptcy. (We weren’t bankrupt.) A massive Citi Bike expansion deal had been finalized. (Had it? News to us.) As these rumors spread, our finances got more shaky, for the City of New York barred us from raising rates until an expansion deal—being worked out with the Investor without our involvement—was finalized.
Every few days, I’d learn about a decision that had been made without us or a meeting to which we hadn’t been invited. It was like accepting an offer to sell your house, and the prospective buyers go ahead and move in with you. You bump into them in the hall, jostle for bathroom and kitchen time. You ask your agent, Why are they here? When will the deal be closed? Soon, they say, pretty soon. Probably.
Similarly, I pestered our attorney, Mike Pagnozzi, asking, Why hasn’t the deal closed? What’s going on? Is this normal?
Your goals and theirs are simply not the same, he reminded me. They’re playing games. Hang in there. They want this deal.
Decision Time
Weeks and more deadlines passed, stoking suspicions that the City of New York and Investor were in cahoots to drive us to the brink of bankruptcy, then scoop up the ruins. Yes, I know that sounds paranoid, but that’s how we felt, especially my partner Michael, who compiled a dossier of evidence supporting this theory. These suspicions only grew when our Citi Bike General Manager left to go work for the Investor.
One by one, my partners decided to sell 100% of their shares rather than the agreed upon 51%. Yet I clung stubbornly to my warm fuzzy vision of offloading the stress while retaining shares and involvement. But no role had been offered; to the contrary, my responsibilities had been whittling away and I felt as cast aside as Michael, our house now in full possession of squatters who had pushed us out into the yard.
One day in November, I called the Investor. Since the previous Spring, I’d been in the background. It was time to speak for myself.
I was in my office that day in our historic building just across the Willamette River from downtown Portland, sitting on my big yoga ball, surrounded by mementos and bicycle-themed art.
“Please, be straight with me,” I asked. “Why are the terms still shifting? What role do you see for me going forward?”
His answer was as clear as mud, a word salad of respect and my choice and it will depend. Any warmth between us had long ago dissipated, if it ever had been real.
I hung up the phone and started pacing, pondering, jiggling in my hands a keyring full of colorful plastic rectangle fobs from Capital Bike Share, CitiBike, Divvy, and all the rest. Why did I want a role anyway? Didn’t I want to be done with this nightmare? Advice, I needed advice, so I started making calls, to my mom and several business-minded brothers down in Texas, two of my partners, and an attorney friend. Opinions ranged from hang onto shares (sure, be a passive shareholder; what harm could come of it?) to get the hell out (the Investor had been deceptive and manipulative, remember?)
My last call was to Pagnozzi. He laughed as always, but said that if it was him, he wouldn’t want to have anything to do with those bloodsucking fleas, that they’d find a way to screw me, no doubt about it. His voice then quieted as he mused, “Sometimes in life you get a minor windfall, say an unexpected bonus or inheritance you can use for a nice vacation or house remodel.” This one, though, could be in the zone of life-changing.
I hung up and turned to stare out my back window, wondering what ‘life-changing’ even meant. I loved my life; it didn’t need changing. Glen and I were happy. Mission had been my primary motivation, which had led to Alta’s success, which brought home the bacon. What would I change about my life, if I could? Hadn’t I accomplished what I’d set out to do in NYC, not to mention the other cities? When the history books were written, would they dwell on the software/hurricane/supplier debacle or skip to the punchline: bike share fundamentally expanded the transportation toolkit, forever? No, I hadn’t planned to sell and pedal away, but so what? What more did I have to prove?
Alta Bicycle Share was one of my babies, and didn’t all babies deserve to grow and find their way and be set free, when the time was right?
A day later, we signed a revised deal selling 100% of the company for a much-reduced price, with a caveat: all cash, in one fell swoop and zero liability for anything in the past and future.
Standing Firm
We thought we were done, but no, for the Investor had to sign as well. Days that stretched to weeks crawled by—no signature, no reasons given—until a Friday in mid-December, when he called Michael to open up talks again.
Early Saturday morning, I rounded up the owners and Pagnozzi for yet another emergency call. Sitting cross-legged on a thick blue gymnastics mat on my basement floor, Levi stacking Duplo blocks nearby, I listened intently as Michael ranted about the City of New York and the Investor conspiring to put us out of business, declaring, “I am DONE, I am telling you. Pagnozzi, listen up: No. More. Changes. Got it?”
If the Investor didn’t sign, we’d be in a horrible position, having given up control. The expansion deals would be null and void. With winter already tightening its grip in NYC, we’d be stuck with both huge bills and inadequate user fees. Perhaps New York City would cancel our contract; probably we’d be forced to declare bankruptcy.
But we’d had enough. It was time to draw the line, let the chips fall as they may. “Michael,” I said. “I’m with you.” The others agreed, and we hung up. I added more blocks to Levi’s stack, wondering what the hell we had just done.
A few minutes later, Pagnozzi called the Investor with the following message: no more negotiations, delays, changes, meetings, or concessions. Sign the deal in hand.
Simultaneously, Michael called the head of NYC’s Transportation Department and told her that we had signed the deal weeks ago, adding something to the effect of, if you want the deal done, you’d better call the Investor yourself.
I don’t know who talked to who that weekend nor what was said, but I do know that by the time I arrived at the office Monday morning, the Investor had signed. Not five minutes later, Pagnozzi tapped on my door triumphantly, declaring that he had told me so, hadn’t he? Just part of the game, seeing how far they could push us, when we’d get a spine.
“C’mon, let’s go get this thing done,” he commanded.
He and I set up shop at a booth at the bar/restaurant next door and spent the morning and into the afternoon snacking on French fries while rounding up signatures on insurance policies, contracts, bank releases, and so on, until 1:55 p.m., when Pagnozzi clicked ‘send’ on the last wire instructions.
Lessons Learned
Was it worth it, even with all the haircuts? Even if the Investor flipped it (to Lyft) and made 10 times more money?
Absolutely.
I just wish I’d had better up-front coaching, so I’d have known what to expect, so the various twists and turns and delays wouldn’t have seemed so alarming.
Now I know my story is just mine, and yours might be entirely different, hopefully simpler and easier. But between my experience and those I’ve coached or advised since then, I have some suggestions:
If you think you might want to get acquired at some point, even in the distant future, start planning now.
Hire a killer attorney (thank you, Mike Pagnozzi 🙏) or broker to represent you.
Build your balance sheet and sell from a position of strength rather than desperation.
Do not take anything personally. Business is business. The acquiring entity is trying to get the best deal they can.
Know your line—and hold it.
Cash on close > promises.
The devil’s in the details; make sure you understand every single micro point.
Don’t celebrate, give up control, or mentally check out until it’s actually done.
Expect and plan for the process to take six months to a year.
Be willing to let go. More great ideas are floating in the universe, waiting for someone like you to bring them to life.
Thanks for joining me on this journey. I hope you’ve enjoyed it, and please forward to five friends and colleagues.
~Mia