Tachles Series: Benzi Ronen shares insight, anecdotes, and expert hacks for Israeli entrepreneurs looking to grow their business in the US.
Find out how to:
Assess the leverage you have in the deal-making process.
Account for the different interests of all parties tied to an acquisition.
Nu, get to the point:
I co-founded Farmigo with my CTO, Yossi Pik, twelve years ago — and just last month, GrubMarket acquired it as part of their strategy to build a better food system.
First, a little context: from the start, Farmigo picked the wrong strategy. In a typical, over-ambitious Silicon Valley approach, we focused our energy on architecting a technology-powered, scalable local food system from the ground up...and it failed. Since then, we’ve been focusing on providing our original CSA software to farms across the country.
GrubMarket took a different path, and it’s paying off. They’ve acquired over forty best-in-class food companies with different strengths and regional focuses. By empowering organizations to act locally, they’re optimized to tackle different challenges — something Farmigo struggled with. And they’re able to create additional efficiencies by purchasing a handful of horizontal companies (like Farmigo) to act as a shared backbone.
Initially, the chance of closing a deal was extremely unlikely; in large part because there were too many competing stakeholder interests. Though there’s no universal roadmap to getting acquired, the hacks below outline how we took every perspective into account: the other business, shareholders, customers, and employees.
Hacks:
Companies Are Bought, Not Sold
The pandemic saw an increase in people looking for safe, nutritious, reliable ways to get food, which significantly boosted Farmigo’s revenue and profitability in 2020. We were optimistic about the future, weren’t actively looking to sell, and enjoyed our independence. I was grateful to be in a strong position when GrubMarket first approached me a year ago.
Our contact was a ruthless negotiator, and I had to walk away from the deal on more than one occasion. In the end, it took nine months for both sides to settle on a workable term sheet — ideally, you don’t want to be in a position where you have to rush a deal; it demonstrates weakness and will dramatically reduce your ability to negotiate attractive terms.
Be honest with yourself regarding the strategic value you bring the acquirer. Overestimating your position could cause you to turn off the acquirer’s interest and lose the deal. Underestimating your perceived value will result in leaving money on the table.
Shareholder Battles Are Won Before They’re Fought
VCs know every deal is different, so they prepare for unknown outcomes by accruing leverage points. The preferred shareholder rights they negotiate during fundraising end up becoming the cards they hold when it comes time to complete an acquisition.
Make it a point to understand the implications of your investors’ leverage points, and don’t assume they all have the same goals. Become intimate with their perspectives and desires; getting internal alignment around a deal is often harder than the acquisition itself.
Don’t expect an investor to do what’s best for the entrepreneur — you should lead the acquisition process and architect the internal and external elements of the deal prior to moving into the term sheet phase.
Customers Don’t Like Change
Early in the process, GrubMarket made it clear that they wanted to run Farmigo as a self-sustaining business unit post-acquisition, where the entire team would remain intact — news I was glad to hear. It streamlined communicating the transition to our customers, as they experienced no change. From a messaging standpoint, I personally invited anyone who was concerned about the implications of the acquisition to have a one-on-one meeting with me, to give them space to voice their questions and concerns.
Employees Worry About the Unknown
As soon as we knew the acquisition was moving ahead, we shared the news with our team, walking them through the possible opportunities and risks. At times like these, you can’t make any guarantees beyond committing to being fully transparent and providing the assurance that you’ll go to bat for them. Despite being in the midst of celebrating the deal, I was immediately caught up in the work of transitioning my employees into the new entity in a way that ensured they felt taken care of.
Good luck!
PS — We didn’t get here overnight, of course. As Yossi and I celebrated the acquisition over a tasty meal and a few drinks, we recalled our journey’s highs and lows: the time we spent with the Farmigo team members (some of the most talented and inspiring people I’ve ever met), the times we felt doomed, and the times we accomplished the impossible. All of which got me thinking, so, over the next few weeks, I’ll share how we managed to survive all of it to get to where we are today — more to come.