After an acquisition, one or more founders often remain active in the company. We often see a combination with a role as minority shareholder.
The buyer wants to keep these rollers on board; after all, they have brought the company to the sale and know it inside out. Often founders also want to continue working for some time, whether or not because an earn-out has been agreed. But where are important points of attention?
Corporate structure
First, it is important for both buyer and seller to assess what the "rollover" looks like. At what level is participation and is participation in common stock or other products? How much control is left for the founders, on or off the board? It is advisable to make good agreements about this.
With venture capital or private equity buyers, there is a chance that the company will form part of a larger whole, as part of a buy and build strategy. Usually a (buy) holding company is then used. It can be attractive for founders to negotiate a roll-over at the level of the holding company instead of in the "own" operating company. The founder then benefits optimally from synergy advantages and this often works better for the buyer as well.
Because the founders get a stake in the group, there will be a broader participation. This has to be compatible with, for example, earn-out structures at subsidiary level; conflicting interests within the group can lead to discussion.
Aandeelhoudersovereenkomst
A good shareholder agreement is essential for a rollover. Think about minority protection, but also about agreements on the role of statutory director or the moment of retiring.
A founder can remain active as a statutory director, or become a titular director and focus on product technology, for example. At the time of acquisition, agreements will have been made about the sharing of risks between buyer and seller, in the form of guarantees and indemnities.
A warranty claim naturally does something to the collaboration of buyer and seller in the company. Therefore, think carefully about how the founder continues his involvement and what his influence may be on the company.
Culture and role change
After all, a good acquisition stands or falls with a thorough investigation into the culture of the company to be acquired, especially if integration of companies has to take place. In practice, strategic, commercial, financial and legal issues receive sufficient attention, but human and cultural synergy sometimes gets snowed under. This while it can be essential to achieve a successful acquisition process and achieve the strategic goals intended with the acquisition.
In addition, one must realize that the role of the founders will change. For example, the founder will have to adhere to certain plans or require approvals. Not every founder can handle that well. Consider the entry of a successful SME into a fund structure or even a listed company, where much more reporting and protocols are used.
Conclusion
In this expert contribution, some points of attention of the rollover of founders are indicated. In a rollover of founders, legal customization is necessary. By thinking carefully about structuring, control and cultural synergy, you can avoid disappointments.
Parties have to cooperate, but as buyer and seller they are to some extent on opposite sides. Certainly the buyer who does not actively participate in the company like an investor will want to keep the founders happy, but also hold them to contractual agreements. Parties can and should anticipate this contradiction as much as possible, with the help of their advisers.
