The Acquisition Rollercoaster

In 2017, Cake Solutions, the company I co-founded, was acquired by a large American organisation. In this blog, I’m going to tell you about my experience of the acquisition, and share what I learned from the process.

The Acquisition Rollercoaster

Cake’s acquisition

Firstly, when we were approached about selling Cake, we weren’t actually looking to sell the business. In fact, we’d just written a three-year growth plan. So for me, the first part of the rollercoaster was the pleasant surprise that someone was interested enough in Cake to make an approach. Initially they approached us about investment, and that very quickly turned into an offer for the business. 

This wasn’t the first time we’d been approached about selling the business. Others had made enquiries in the past but I didn’t feel that they were serious. This was our first serious, credible offer. And when we were made the offer, it was hugely flattering. It was a good, fair offer, without any negotiating. As I said, we weren’t looking to sell at that particular juncture. In fact, we were looking to grow. But we could see that the company that wanted to buy Cake was an entrepreneurial organisation, despite being a lot bigger than us, and it was a very technical organisation. As a board of directors, we felt that it was as good a fit as we were ever going to find. 

Once we accepted the offer, we moved into the due diligence phase. At this stage, I became very pragmatic about the acquisition. I wasn’t indifferent, but I felt that if it didn’t work out it wasn’t the end of the world because we had a plan and knew that the business would continue to be successful and grow. We were confident another opportunity would come along in the future if this one fell through. 

I wasn’t worried about the due diligence either, because I felt that we were a very clean company and that this stage wouldn’t throw up anything unexpected. In the five years prior to the acquisition, we’d become increasingly professional in the way we conducted board meetings, ran the finances and so on. As a business, we were stable and had the ability to continually find sales, which meant we would continue to expand. In some cases, we’d had to turn sales away or refer them to our competitors, who we had good relationships with. 

The closer we got towards closing the deal, the more I started to look to the future. At this stage, I was confident that the company acquiring Cake would continue the work we were doing, respect the team and try to work in a fair way and retain a lot of the cultural elements that led to our success. As a result, I started to think about the possibilities and what I could do once the deal went through. It wasn’t about the money. Of course money is important in that it gives you and your family security, and allows you to do nice things, but what was more important to me was the freedom it would bring to decide what I wanted to do. 

For some people that might mean going abroad and sitting on a beach with a cocktail. But that’s not who I am. I was thinking about having the freedom to do some really exciting stuff moving forward. I think most successful entrepreneurs have a similar mindset. They don’t go into business aiming for a successful exit, they want to continue to add value. And if they continue to add value in whatever they do, they will continue to generate more success because they have that mindset and ability to succeed. This was what I wanted to do; to carry on with some personal projects but also to help other companies achieve their goals. 

Towards the end of the due diligence I began to fear the deal not going through. I had started thinking about the future, what I could do and the impact I could have. I wasn’t expecting to place so much importance on the deal going through and that caught me by surprise. It made the final stages a very long couple of months. 

Selling to the right company

One of the most important criteria for me was that we didn’t just sell to any company, but that we sold to the right company. That meant that they would, as much as humanly possible, continue operating the way we did. Cake operated quite differently to most corporates, even though by this time we had been in business for 17 years and had around 70 people working for us. Throughout our journey, we remained very entrepreneurial and agile. So it was really important to find a company that shared those values. 

We didn’t want to become one of these stories of a small organisation that’s doing amazing things being swallowed up by a big corporate entity, only for the acquisition to kill the culture and ethos of that small company, and for the big corporate to lose what they actually bought in the first place. I didn’t want that to happen to Cake and I’m happy to say, several years down the line, that I don’t believe that has happened. 

One of my other concerns was for the people who worked for Cake. I’d worked with some of them for 17 years. They weren’t just colleagues, they were also friends. But the culture at Cake was one of the reasons why they’d stayed with us. I have to say that I think the acquisition worked out well on this front, because although there was a little bit of churn, it wasn’t substantial. The company that acquired Cake and the remaining Cake management team has done a really good job of retaining a lot of the cultural points that made Cake really appealing to people in the first place.

Of course there have been changes, because there will always be more processes and company politics in a bigger company. Decision making changes as well, because there are layers of people who make decisions as opposed to very quick entrepreneurial-type decisions being made. That said, we were bought by a very successful and, in my opinion, really good partner.

Why it’s so important to have cultural alignment

At Cake we built a cultural platform that enabled sustained and achievable high growth. We definitely didn’t have this cultural platform from the get go, because in the early days I was learning and, if I’m totally honest, we were flying by the seat of our pants. We were working with big organisations and on fairly substantial government projects when there were just seven or eight of us. But the reason we could do that was because of the people. 

As we developed as a company, and as individuals within the company developed, the culture developed. When we saw things that worked, we nurtured them. As a result, we developed a fairly unique culture within our organisation and that was recognised by the partners that we worked with, but also the people that we employed. For instance, we didn’t need to use recruiters because  people were interested in what we were doing and we were very good at talking about what we did. This formed a large part of our culture. We wanted to be seen as experts in our field, to engage in the community and to help other people achieve what they wanted to in our area of expertise. 

That meant we wrote blogs, attended conferences with supporting companies by sponsoring them, and sent speakers to conferences that we didn’t sponsor. In the end, conference organisers used to contact Cake and ask us to speak because our people became that synonymous with the technologies that we specialised in. That was all part of the culture, and I’ll talk about company culture in more detail in a future blog. 

But when it comes to an acquisition, finding cultural alignment is really important. At Cake that not only encompassed the culture, ethos and outlook of the business, but also technical alignment. This was particularly important because everyone in our team joined Cake because they were passionate about a set of technologies. You don’t want to put your team in the position where they have to fully retrain with new technology that they’re not familiar with. It’s important to recognise that Cake wasn’t fortunate to develop the culture and team that we did, it was by design. 

That was why it was so important for us to see that the company acquiring us shared our excitement about that technology and wanted to continue to work in that area. 

Keep one eye on the bigger picture

I mentioned earlier that towards the end of the process I became more concerned about the deal not going through. What I didn’t realise at the time was that there was a lot of other stuff going on with the organisation that was acquiring Cake. It was all good, but there were a couple of other potential acquisitions happening at the same time which slowed things up.

Not only that, but they were still growing and had experienced huge growth over that period, far in excess of Cake. They’d been really successful and become synonymous with video streaming, so there was a lot going on in their world. It’s important to remember that the acquisition might be the most important thing in your world, but it’s not necessarily the most important thing in their world. You have to keep one eye on the bigger picture as far as possible. 

You also have to remember that you never know what’s going to happen in the world. Take what’s going on at the moment, where we have Coronavirus to cope with. Different companies react in different ways. Some are very pragmatic and make changes that are necessary but carry on as much as possible with business as normal, or even use it as an opportunity to expand. Whereas the natural reaction in other companies is to shut up shop and not invest. You can never know how world events are going to affect you. Companies going through an acquisition at the moment must be fearing that the Coronavirus situation could be a factor that affects the deal. 

How to work towards a successful acquisition

Firstly, it’s really important that you run a clean company. What I mean by this is that you don’t have any skeletons in the closet, you don’t try and hide things, and you always try and do things properly. If you do that, there’s less chance of a deal falling through and that should give you some comfort because you know you’ve done everything you can to put your company in the best position for a successful acquisition.

Secondly, you need to know that you don’t have to accept the first offer that comes along. Like I said earlier, Cake had been approached in the past by a few other companies with enquiries, all-be-it tentative and not at the right level. We were even approached by a company during the acquisition that wanted to make a competing offer. We turned their offer down because we felt that we’d found the right company to acquire us, even though we had the potential to make more money by accepting a different offer. But this just goes to illustrate that it wasn’t just about the money. It was about choosing the company carefully, which ties back into company culture and whether the company acquiring you is going to behave in the right way to continue the success of your organisation. 

Preparation is key

The main thing is to get all your ducks lined up before the lawyers come in. There will be an awful lot of people looking at all the different aspects of the business, from tax and finance to HR and the people within the business. You have to make sure that you have a well-run organisation. 

This isn’t a quick fix. You need to do this in the years before an acquisition and many of the steps you can take are just examples of good practice. For example, as you develop and mature as a company you need to put processes and people in place to ensure that board meetings happen every month, that agendas are produced and that the minutes of those meetings are recorded.  You need to make sure that the weekly cash flow is updated and that there are management accounts produced every month so that you know exactly where you’re up to. 

There should also be a process for running your business and you should run your business in a modern and efficient way. That might mean using software as a service as opposed to having an old mainframe, for instance. If you have overseas workers, you need to ensure that all of the paperwork is correct and up to date. These are all examples of good business practices that you should strive to achieve whether you’re aiming to be acquired or not. 

Acquisition is only one option

You don’t have to run your business with a view to being acquired in the future. I think most people go into business because they want to provide security for themselves and their family, and that’s a really nice outcome. But remember that there are different ways of doing that. You can build a successful company, generate lots of profit and turnover and create a really nice lifestyle over a number of years by making the money that you need – it doesn’t have to be huge sums. It will vary between different people. You might build a lifestyle company and, you never know, that might be your legacy to your children, to leave them a family business that they can take over from you when they become adults.

Equally, if your aim is to build a business to a point to sell it, then fantastic. But it’s important to remember that most people’s skill sets don’t allow them to take a company from zero to a billion-pound organisation. The reality is that many entrepreneurs don’t want to build a company with hundreds upon hundreds of employees. 

You should also remember that there are different levels of exits. You might build a company as I did to 70 people, or you might build it to 30 people if it’s a very specialist company. Look at a company like Instagram, which had very few employees before it was sold. Then there are the organisations that have 1,000 employees when they sell. It all depends on the entrepreneur and how far they want to take it. 

As an entrepreneur, you should explore how you can carry on doing the things that you really want to do, such as focusing on the innovation and entrepreneurial side of the business. To do that, you might bring in a CEO to run the business to allow you to work within your unique ability. In that way, you can potentially build a business that you own a large share of far further than your skill set allows, because you’ve introduced the right people around you to do the things that you don’t want to do and aren’t as good at so that you can concentrate on what you are good at. 

For more ideas and information, feel free to get in touch: 

Guy is an experienced individual with over 20 years in the tech, software & consulting/advisory industries, as a founder, director, investor and advisor in a number of companies. 

Guy co-founded and is a non-exec of, which works with tech startups to turn their vision into a reality. is made up of experienced software engineers and commercial operators and works as a sweat equity investor with a shared risk philosophy at the heart of everything it does.

We’re ready to talk...

Wherever you are on your startup journey, get in touch and let’s unpack your thinking together and see where we can help turn your idea into a reality.