Lessons from an Acquisition
As many of you saw yesterday, Internet Brands (NASDAQ:INET) has acquired one of my sites. (The sale actually closed in February, but they wanted to finish up all their acquisitions before announcing any of them.) Since then, I have also worked with a friend as he went through the same process.
Now that both the deals are public knowledge, I wanted to pass along some of the things I learned while selling two high-dollar sites to large companies for those of you who are contemplating a sale now and those of you who will somewhere down the road. (Also be sure to read “How to Sell a Website.”)
Enlist the Help of Professionals
If you believe your site could sell for more than $100,000, you’re throwing money away if you don’t use an experienced broker or investment banking firm to help you sell it. Because they’re much more adept than you at running an efficient process, finding potential buyers, and maximizing the bids from those buyers, they make up their fee many times over.
For example, this whole process started when I received an unsolicited bid for the site. Before all was said and done, though, my representatives had secured not just one, but two final bids that were easily more than twice what I ever could have gotten on my own.
If you’re looking to sell, now or in the future, I can provide you with some strong recommendations. Use the Contact Me link above to get in touch with me.
The Final Offer Isn’t the Finish Line
Getting the final bids in is just one step along the way. You’re not done until you actually close the deal, and that’s not a foregone conclusion by any means. That’s why it’s important to understand that…
All Buyers are Not Created Equal
Thankfully, I think we would have been well-served going with either of our two strongest bidders. Both were fantastic throughout the entire process, and I worked with more rockstars at Internet Brands than I ever have at any other company. The head of their transition team was amazing, and they backed up every single promise they made. I would do another deal with them in a heartbeat.
I can’t say the same for my friend, though. He accepted a great offer only to see it deteriorate miserably over the next few weeks — leaving him having to go with the number two bidder. He still ended up with a great deal, but it wasn’t nearly as smooth as he and I had expected it to be.
It’s Not All About the Money
Okay, it is mostly about the money, but there are several other intangibles that factor in heavily as well.
How much time do they want to have to transition the site? You don’t want to be waiting around for several months, running the site as a lame duck, while they take their time transitioning the site. Be sure the transition time is stated clearly and that it’s not longer than it has to be.
What responsibilities will you have after the transition? Make sure those are stated clearly as well. If you want to just transition and walk away, make sure to get that into the agreement. In many cases that’s a reasonable request and one that buyers will be okay with. In others, though, there are strong reasons for them to want you to stick around. It just depends on your situation.
What restrictions will you have with regard to going into similar businesses in the future? For instance, imagine you have two offers on the table: one is for $100,000 more than the other, but it also prevents you from entering similar businesses within the next 5 years. Is it worth $100,000 to handcuff yourself for the next 5 years? It may very well be, but think about that as you’re weighing different offers.
Know When to Walk Away from the Table
My wife and I went to Puerto Rico with my company back in 1998 and stayed at the Westin Rio Mar Beach — a great resort that also happened to have a friendly little casino. I’m not a gambler, but Brett and Allen from Summit Catalog (great guys and great friends) spent the week showing me how to get almost even odds at the craps table, and by the last night I was ready to put all I had learned into practice.
Man, was it easy. Within minutes I was up $250 and still going strong. They were clearly great teachers, and we were going to walk away with some outstanding spending money.
It didn’t take long for things to start heading the other way.
Before I knew what had happened, I had lost almost all my winnings. I had no idea what hit me. How did things change so fast?
As I left the table with exactly as much as I had started with, the nice man working the table gave me some of the best advice I’ve ever gotten: Nobody taught you about knowing when to walk away, did they? I’ve never forgotten that.
The less defensible your site is, the more it’s just like gambling. I had built the site into the largest site of its kind on the web, but 85% of the traffic came from search engines. It had had top rankings for highly competitive terms in Google for years so there was no reason to expect that to change, but would that be any consolation if Google suddenly decided to change things and the business disappeared overnight?
Yes, there’s a good chance that you’ll leave money on the table (I did), but you have to weigh that against the chance that something disastrous happens to the business. Every day you hold on to it, the risk increases. At some point you have to make the decision to bank your equity and walk away with your winnings.
You’re Never Guaranteed Another Opportunity
One of the biggest things I’ve learned over the past year is that past success is no guarantee of future results. I had always assumed that I’d be able to use the same strategy for several more years (it had worked for years, so why wouldn’t it work for several more?), but it became apparent during the process that similar opportunities were drying up fast. I might be able to replicate the same success once or twice more, but there was no guarantee.
Since then, too, I’ve become more and more conscious of just how many well-known successes are actually one-hit wonders. Their one-time success brings them fame, but they struggle to replicate the same success again — even with the same techniques. There are obviously exceptions (ShoeMoney, for instance, has hit several homeruns), but look around and notice how many people are more famous for being famous than for a history of multiple successes.
Obviously this makes the decision to walk away even harder. If this may be your only chance to secure your retirement, how do you know when it’s time to sell? I don’t know. Every situation is different. I’m happy to talk to you if you’re struggling with that right now, though. I may not have an answer, but sometimes it just helps to talk to someone who’s been there.
It’s Totally Worth It
It never crossed my mind a year ago that I might get to this point and regret everything — selling the site, spending two and half years of my life building it, etc. — but I see now that it could have easily ended up that way. Thankfully, though, nothing could be further from the truth. It was totally worth it, and I’d do it again in a heartbeat.
It’s worth every minute you put into it, every time you decide to press on instead of quitting, every time you sacrifice to get closer to the dream. Totally worth it. More than I ever imagined it could be.