95 departments working in parallel and scrutinizing the deal. Try not to rush the process; communicate openly and respect the other party’s timing requirements. Exclusivity A point that many entrepreneurs are not familiar with is the issue of exclusivity. Typically, when the acquirer signs a non-binding term sheet, they request that the target company sign an exclusivity clause, which states that the company cannot negotiate with any other buyer for a specified period. It is crucial to ensure that this clause remains within the norm, usually between 35-45 days, and to be careful not to inadvertently agree to longer periods, such as 90 days. One possible solution is to find a middle ground, with extensions based on deal progress of the deal, so you are not locked in longer than necessary. The stage at which the exclusivity period ends is a significant milestone in the negotiation process; by then, the acquirer has already invested considerable resources in the process and will be concerned that you might return to the market to find another buyer, which could serve as leverage for the acquired company. Insurance Until not very long ago, the buy-side usually demanded the acquired company leave a percentage (often 10%) of the proceeds received in escrow, just in case something came up in the future that breached the terms of the acquisition and caused damage to the buyer. Today, it is common to buy an insurance policy for the deal at a relatively modest cost, allowing acquirees to benefit from the entire amount paid as part of the acquisition, while the buyer is covered in case of future surprises. Running a startup is a challenging endeavor that demands constant decisionmaking, rapid adaptation, and a relentless focus on growth. The fast-paced nature of startups often means that founders and their teams need to respond to immediate needs and opportunities. It is crucial to periodically pause and reflect on whether your short-term decisions align with your long-term goals. Taking the time to evaluate your strategic direction ensures that you are not just reacting to immediate pressures but are also building a sustainable foundation for future success. This reflection can help identify potential misalignments and allow you to course-correct before small issues become significant problems. Ultimately, the ability to navigate the present while keeping an eye on the future is what distinguishes successful startups from those that falter.
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