An acquisition gone right
Entrepreneurs love to complain about being acquired. It’s one of their great past times. “It was an amazing startup when we sold it. Everything was going great. But then our new corporate parent company totally ruined it all.”
And, in fairness, there are plenty of very recent stories to justify this reaction. Plus, huge disasters are fun to talk about.
Erin Griffith recently detailed one involving GroupMe. The very abrupt, and very visible exodus of the founding team (and other key employees) speaks to a company that ended with a whimper. The acquisition of OMGPOP by Zynga is an example of an “insta-failure." And the recent buyback of Bebo reminds us of one of the greatest Silicon Valley M&A failures of the last decade.
But, I think it’s also important to talk about acquisitions gone right. Because they do happen. Quite often. And the more we talk about them, the more we can learn from them. Not to mention, it creates a healthier climate for our friends in Corporate Development departments nationwide.
More than a year has passed since Turner Broadcasting Company purchased Bleacher Report, and while it’s still early days, I think it’s safe to say that it exceeded my expectations as a founder.
(No, I am not with Bleacher Report anymore. I haven’t been for a while. I’ve started my next company and brought Time Warner (parent company to Turner) on as an investor, largely because I was very happy with how they were treating my previous baby. )
Starting companies is about more than reaping big paydays. Legacies do matter, and the best thing that you can ask for is that the brand you create lives on. And grows. And that your children or grandchildren use your product.
Being able to use your own product 10 years after you sell it is the ultimate gift for any founder.
When a large acquirer comes to you and says that they want to buy your company, the dance is predictable to the point of pain. They talk about “synergy” and all the things they can do “with a greater amount of resources.” You talk about opportunities forthcoming when forces combine. It’s handshakes and smiles and woodland critters singing about how great life will be in Fortune 500 Land.
And, in our case, that actually happened.
Last week, I was watching the MLB Playoffs with my friend, when a commercial for Bleacher Report popped on the screen.
“Is that still weird for you?” he asked.
“Yes,” I admitted. “It is still surreal that I’ve seen Cal Ripken and Charles Barkley stand in front of the camera during their respective Playoffs and talk about the sports website that I started with my junior high friends.”
Because it is.
But it is part of a larger narrative on why this M&A deal has -- up to this point -- been a success story.
And here are a handful of the reasons why it is working:
Turner made big promises -- and kept them
Lots of big promises are made before the ink dries on a merger agreement. And, not surprisingly, those promises tend to be almost salesman-like in their portrait of the future.
In the case of Bleacher Report, our future owners spoke at length about a world in which Turner could use all of its powerful broadcast assets to “synergistically” enhance the company’s brand. And, to give credit where it’s due, that is exactly what they have done.
The aforementioned commercials and integrations of top-tier celebrity endorsements go a long way. The data can corroborate the impact it had on user base growth.
But Turner has also used their resources and experience to help Bleacher Report hire some big name editorial figures. At this point, it seems like every week, the company adds one more “super huge” name to the list. The company recently poached Howard Beck from The New York Times and brought on Ric Bucher, along with his army of 450,000 Twitter followers. This would not have been possible as an independent company.
It had a reason to buy us -- and that reason actually made sense
So often, it seems like a big company has to conjure up a logical reason for making an acquisition. Often, that reason is desperation. Many viewed AOL’s purchase of Bebo as a “Hail Mary” attempt to save the company during its darkest hours. I would personally argue that Yahoo! bought Tumblr out of mutual desperation.
So, it may seem like faint praise to commend Turner on actually having a good reason to make their purchase of Bleacher Report.
The short story is straightforward — they had some of the world’s most valuable sports broadcasting rights, but no large website to complement that offering. It just didn’t make any sense to own the NBA Playoffs and March Madness, while not being able to give advertisers much in the way of digital offerings. That was the need.
And as a solution, Bleacher Report made perfect sense. We offered them a huge audience, but also a massively popular iPhone app and the web’s largest email newsletter. This kind of distribution simply did not exist anywhere else. And it gave them a competitive advantage over most of the competitive landscape.
In short, there was never even any question about “why is this deal happening?”
To some extent, that reflected upon both Bleacher Report, as well as the media landscape as a whole. Media companies are often easier to integrate than other businesses. There is rarely product cannibalization, redundancies are usually limited to top executives and Sales, and the businesses are typically straightforward.
This wasn’t just welcome news for Bleacher Report, but its competitors as well. This probably explains the recent, massive wave of VC’s investing in media companies. Media companies will continue to get acquired, since the acquisitions simply make sense for those opening the wallets.
It provided a level of upward mobility for employees that would not have existed otherwise
Startups are a great place to build a career. Bleacher Report hired a lot of interns, who became employees, who became managers. There were a lot of people who grew quickly and took on staggering levels of responsibility quickly and at a young age.
But once startups reach a certain size, upward mobility begins to slow. In fact, it can sometimes screech to a halt. That is what happens when you reach the “operational leverage” point that VC’s so dearly hope to achieve.
Our company grew from four employees to eight employees quickly. Then it paused. It grew from eight employees to twenty employees quickly. Then it paused. One of the fastest periods of growth was from fifty to one hundred and fifty. And, yet, after we reached that level, there was a feeling that we were in a good spot. We could scale revenue based on pricing, not on having twice as many feet on the street. Our traffic was so high that it was no longer our limiting factor. We did not need to (nor could we easily) double our traffic.
Startups often hit these points. Growth doesn’t always mean doubling your staff, creating new management layers, or throwing big bucks at winning products.
Sometimes the company rides its growth and consolidates its strengths. That is good news for startups and their valuations.
The problem, though, is that startups hire ambitious people. The most ambitious people. They want to grow, and they want their jobs to evolve with each passing month. That is why they are at startups.
And when startups become “the same old winning ways”, that can create an issue. Good acquirers can help solve this problem.
Case in point — Bleacher Report just launched a UK presence and chose a few lucky employees to help kick start their London office. That would not have happened otherwise. The employees who got picked to move to London were so ecstatic that no animated gif could adequately represent their excitement.
Turner also opened a brand new studio in New York for the Video team. The studio we had previously was nothing short of a tenement.
Employees haven’t benefited from these opportunities equally. Some invariably get restless, some move on to new homes. There are plenty of people who are startuppers at heart, and corporate ownership just isn’t for them. But, for the most part, I still see the same old work buddies on my Facebook feed talking about how much they love their job — in settings that go far beyond anything we could have previously provided, even with VC funding.
And virtually the entire pre-acquisition Sales team is still in tact a year later. I got dinner with them last week. That isn’t just unusual, that is incredible.
In summary, the deal worked. It worked for them, it worked for us. And, most importantly, it worked for the site’s 50 million users, who now get a much better product.
And, yes, I feel an obligation to tell this story, because it happened, and the world should know that highly-successful M&A can happen. It’s not all about corporate missteps and screwing up a founder’s hard work.
Sometimes, it just works.