M&A mistakes to avoid if you want to build a portfolio with best-in-class assets

Years ago when I was in NYC every couple weeks, a treat of mine was to make my way to one of many Q&As going on around the city at one post-work cocktail hour or another. One of my favorites was Warren Lee’s Founder Speakers series. One night, he was interviewing 24/7 RealMedia (TFSM) founders David J. Moore and Mark Moran (whom Dave Morgan had described as the last man standing of the dot com bubble). The talk was entitled “How A Company Survived The Dot Com Crash And Sold For $650M.” I recall, since I held some shares.

It wasn’t always rosy. At one point, Moore mentioned how a would-be buyer had TFSM all locked up but at the last second, they tweaked the offer. TFSM’s then-owners were eager to unload the asset, but a bit irked at the re-trade… TFSM company went on to sell for $649M instead.

A year ago, after hiring CIBC to manage a myriad of strategic conversations we were having, we were close to finalizing a deal over the holidays. It was the end of the decade, I was overall very proud of what we’d build but a bit fatigued. As custodian of the business, I was mainly looking for a good home for the brand.

At the eleventh hour, my counterpart at the buyer informed me that he wanted to make a material change in the structure and offer. I knew our investments in WM2020 were starting to pay off and thus sensed that we’d have a solid 2020… It wasn’t an outstanding deal, but it was OK.

Sometimes buyers get greedy OR mistake graciousness with desperation, and then lose out on strong assets. In the 10-Year Overnight Success, I referenced how Defy Media (then Alloy Media) did this way back, by pulling the cash component of their offer, rendering their proposal unattractive.

I knew I was doing the right thing, but didn’t want to decide by myself. I spoke to my team and presented the pros and cons of their deal, and why the revised structure wasn’t as enticing. In good faith, we went back and made them an offer which in hindsight would have still been a steal for them, but I didn’t want to walk away unilaterally, either (I wasn’t questioning their intentions, but for them to think their revised structure wouldn’t have been a turn off was odd).

In the end, we agreed to walk away. It was a tough decision, but instinctively, the right one.

The bigger lesson?

Regardless of which side of the table you’re sitting, as buyer or seller: “When you negotiate, leave a little something on the table.” Those were words I’d read ages ago from Dick Parsons, the former CEO of Time Warner and ex-chairman of Citigroup. Or as paraphrased by Susan Lyne: “In negotiations, a total win is a Pyrrhic victory. You will meet these people again.”