Dear SaaStr: As An Employee, As an acquired employee, How Do I Negotiate My Compensation in an Acquisition?
Unfortunately, as a non-CEO, non-founder of an acquired start-up … you have almost no ability to really negotiate. Especially below the VP level.
Overall, your ability to negotiate in M&A in any context, in any job, is based on your ability to walk for something better, or just walk. Unless you are the CEO, you have limited options here. Most acquirers will be OK if you walk. Right or wrong.
Acquirers will generally divide the employees into four groups:
- Group #1: Need to keep, individually. This will be a handful of key employees. They will likely get special retention packages that stretch out over 2-3+ years. You can ask for more here, but it’s hard to do too much here. Most acquirers have a general set of rules with what they want to do here. The CEO of the startup being acquired can try to rejigger things with the acquirer before the deal is signed. But after that, it’s often close to impossible to make any material changes.
- Group #2: Need to keep as a group. Beyond the key employees, the acquirer may require 80-90% of a group to agree to employment contracts (e.g., all engineers). You can say No. That may give you a tiny bit of leverage. Or you may just say No, and lose your job. As long as the acquirer gets their 80-90%, that’s all they’ll care about. Not you individually. This “keep as a group” incentive usually only happens in smaller deals that approach acqui-hires.
- Group #3: Don’t care if they stay. Another group the acquirer won’t care much if they stay or not. Non-critical product managers, customer support and success, etc. This varies by acquirer and type of deal. They pretty much never get any really incentives to stay, maybe some standard stock options as new hires.
- Group #4: Don’t even want. Often, G&A (finance, legal, etc.) and in some sad cases, sales and marketing — the acquirer doesn’t even want. They may not even be offered jobs; may be offered short-term transition positions; or be kept on, but with a vague status (“You’re Now Reporting to Idaho”). You can’t negotiate nothin’ much here. Don’t expect anything at all, unfortunately.
The reality the golden handcuffs, the big retention packages, etc. — they only go to a handful of folks.
And 98/100, the acquirer makes all the decisions here (and makes many mistakes because of it). Because it’s seen as their money, as “extra” compensation on top of the deal price.
Sometimes, you don’t even know what these packages will be until the deal closes, or just before. Oftentimes, your deal champion doesn’t even know. Because it’s often not even really up to them.
A related post here:
(Outta here image from here)
