> Discussions have pivoted recently as Jamie (CEO) has expressed interest in pursuing an acquisition with Amazon. He has been consistent from the beginning of our relationship [referring to a $1M investment via Amazon's Alexa Fund) that he sees Amazon as the preferred home for his company, with the only other path being an IPO.
Is it normal/wise for a CEO to give a potential acquirer this vibe? I would be worried that it comes off as desperate. It's also possible that he said this to multiple potential acquirers, to make them all feel special. But if each suitor thinks that it is the preferred option, that might lead them to offer less than if they thought the CEO didn't have a preference.
Inexperienced negotiators believe that you should primarily get better deal terms by bluffing more leverage. Experienced negotiators know that you get better deal terms primarily by having more leverage and the bluffing is optional.
I agree that having leverage is better than bluffing it. But under what circumstance is it advantageous to tell a potential acquirer that you think you'd either get acquired by them or go IPO? Isn't it better to let the acquirer think that you're open to transactions with other possible acquirers?
Or was the strategy here that he wanted to make them think they're competing with the massive riches received in an IPO?
I wouldn't question the strategy as much if it had just been executed during the acquisition courtship period. But it sounds like he made his feelings clear from the beginning, when he raised $1M from them (presumably quite a while earlier).
keep in mind that in this case Amazon probably has better market analysis and information than ring. It is pretty tough to bluff a negotiating partner like that.
Meanwhile, there is a lot of value in communicating intent and maintaining their interest.
Well it's partly self-fulfilling isn't it. Amazon isn't going to do early stage investments in companies that aren't open to the prospect of eventually being acquired by Amazon. So of course the emails about the acquisition are going to include the CEO of Ring being very open to the acquisition, you just don't get into this situation otherwise. It's also a smart move on the part of the CEO since you need to have an exit plan and the smart home market is in extreme danger of being commoditized over time - I'm sure that people have seen the struggle of GoPro and learned some lessons. Not every company is going to become a S&P500 company, and it's good strategy to be aware of that and plan for realistic outcomes.
However, as you can see - he leaves on the table the option of an IPO which is basically sending the message "I would love to work with you... but I have another option if you don't give me what I want." That's a pretty standard negotiating tactic.
the question I ask myself is, "did the CEO walk away from this with enough amazon stock/equity to buy a great house, live a very comfortable lifestyle and never have to work another day in his life unless he wants to for fun, even if he lives to age 95?" and the answer is almost certainly yes.
As a practical matter, that makes sense. But what about the employees who have 1% or .1% of the equity that the CEO has? Getting 20% more could lead to meaningful changes for them, even if it wouldn't materially affect the CEO's lifestyle.
If I were a long term employee with a lot locked into private stock I'd want an exit ASAP. I see employees upset about companies who stay private 'too long'. Secondly, I don't expect a VC funded company to prioritize their employees over the CEO or investors, I'm sure some companies are like that but joining a company thinking that would be very naïve.
Is it normal/wise for a CEO to give a potential acquirer this vibe? I would be worried that it comes off as desperate. It's also possible that he said this to multiple potential acquirers, to make them all feel special. But if each suitor thinks that it is the preferred option, that might lead them to offer less than if they thought the CEO didn't have a preference.