94 knocking. As a lawyer who has overseen dozens of deals, here are a few considerations from a buyer’s point of view. Some founders make critical mistakes early on. In some cases, these mistakes can cause headaches in the future, particularly when the company enters a sale process. Here are a few things to be aware of from the point of view of a potential buyer: Israeli Innovation Authority (IIA) Some entrepreneurs seek funding from the Israeli Innovation Authority, usually during the early stages of the company’s life. This is a great way to receive funding without dilution, and it helps entrepreneurs significantly. However, entrepreneurs should know that one of the IIA’s demands for funding is that the technology produced from R&D supported by the IIA must remain in Israel. Consequently, when a company wants to acquire a startup and move its R&D center and IP to the US or elsewhere, it must pay the IIA an exit fine. These penalties can reach substantial sums and have even killed planned acquisitions that suddenly became too expensive for the buyer. Be Careful of Promises Promises can backfire. For example, in a case we worked on, a young startup promised one of its employees that, in addition to a base salary, he would receive 10% of the total acquisition amount if the company were acquired. This guarantee almost caused the whole deal to fall apart and required a lot of extra work to find a solution that satisfied all parties involved. Creative Tax Structures May Kill a Deal Young startups, and indeed any individuals, consult with tax experts to improve their tax plans. While doing this is important, it’s crucial to remember that some tax decisions that seem brilliant at the time may jeopardize a future deal. For example, a target company one client was interested in acquiring took an aggressive and creative stance on tax withholding matters, forcing the buyer to take corrective action and ultimately costing a lot of money. Timeline Although it may seem like a quick process to an outsider, a sale process takes time—an average of at least four months from the beginning of marketing the company, negotiating with suitors, to the final signing and closing. Large corporations also have internal processes that take time, with numerous
RkJQdWJsaXNoZXIy MjgzNzA=