Member Jeff Cleland Speaks: How About a Win-Win-Win Situation?

The Challenge:

The case at hand was brought by the CEO of a SaaS company whose major marketing partner was just acquired by a private equity firm. The PE firm was interested in also acquiring the CEO’s company in order to have an integrated suite of product offerings that was critical to their recent acquisition gaining faster and greater sales in the market. In short, the PE firm was interested in markets.

If you were in this situation, what would you do?

It is never a bad thing to have a solution that is mission critical to other entities. The question is how to play the cards. These deals can take on great complexity, yet I believe it would be worthwhile to explore a win-win-win situation to benefit all the parties involved. The biggest issue at the moment is that the technology of interest is only a part of your company’s overall value proposition. An optimized solution would mobilize the solutions that this PE firm is interested in, while leaving latitude to nurture the value of other technologies that your company is developing.

If I were in your shoes, I would propose to your recently acquired partner and its PE owner an exclusive licensing agreement for this technology in exchange for equity in your client. Moreover, set up a service agreement to generate income for managing and maintaining the technology to your major client. This gives you potentially valuable equity ownership as well as a revenue stream to cover costs of servicing the account. Then, why not go a step further and court the PE firm to make an investment directly in your company? You will have more resources to build out other technologies and the PE firm gains an ownership interest and oversight of a company that provides critical services to one of their acquisitions. I have been party to this type of transaction before and the results were optimal. Good luck!