What equity/salary/earn-out can I expect from a purchasing company for my company and myself?


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I am the single member of an LLC consulting company. I have half the revenue of a company that is thinking of "acquiring" me. They are in the same industry. They just incorporated within 1 year and have 4 founding members and are pre-series A. What is a reasonable compensation package for the acquisition of my company. They have mentioned an idea of an offer being a salary and position with their company, the ability to earn what my company already has and will earn with it's current contracts, and either a bonus or equity stake in their company. What kind of equity can or should I expect. Founders equity or employee equity. What does that do to my future earning potential?

Equity Acquisition

asked Sep 16 '11 at 08:12
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Seamus
6 points
  • So you want all of what you were making before, plus equity in their company plus a buyout/purchase? That's asking a lot. I would say pick two of the three - not all three... – Tim J 9 years ago

5 Answers


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The question isn't really how are they setup, more what is your company worth?

  • How many clients do you have?
  • What has your revenue been for the last 1.5 to 2 years? This is a good rule of thumb for a merger like your describing ... If you were to continue on the way your going, thats what you are likely to make going forward ... why sellout for less than that?
  • If I said $200,000 would you sell? How about $300K etc.

As for what can you expect when you change companies?

  • Are you getting shares in their company or are you just an employee? If your getting shares then your probably under the same rules as the other people starting the business.
  • What is the standard rate in your area for what you do? Employment is employment, the sale of your company is a seperate transaction to your continued work.
  • What would it take for you to stay? I'm guessing if they offered you $5 an hour you would probably go elsewhere.
answered Sep 16 '11 at 11:22
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Robin Vessey
8,394 points

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I'm waiting for the offer. I want to work for them and they want me as I bring a valuable capability in BD that they want, in addition to my company's history and customers. They say they will be offering employment and some form of sharing. They have mentioned second class shares (meaning non-founder shares) don't know if that is A or B.

Let's talk ratios. They say they will do $5M. I will do $2.5M. I am about 50% their size, but have a history of work they don't have and need and contracts with a customer they want.

answered Sep 17 '11 at 07:51
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Seamus
6 points

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What was you revenue and grows for last 1-2 years? Usually companies are bought for 5 years revenue with estimated grows. So if your revenue for last year was 100k and grows was 20% so they should give you 100 x 1.2 x 1.2 x 1.2 x 1.2 x 1.2 just for the aquisition. You can take this money by equity or money as you wish.
Plus they should pay you your market salary as you are the emploee in company they are buying.

answered Sep 17 '11 at 08:09
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Areshchanka Alexandr
49 points

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Revenue for past 4 years has grown 45%. However, this year it is -50% of last, but funding is there so it will go back to 20% 0f 2010 numbers. Predicted 40% for 2012 and 2013.

answered Sep 17 '11 at 08:30
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Seamus
6 points

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Sorry was wrong in calculations, they should pay you 100k + 100k x 1.2 + 100k x 1.2 x 1.2 ...
In my opinion this is reasonable price, otherwise you are loosing cause they they are aquiring you just for idea\shares or whatever "untuchable" close to cheating, because of with such numbers of growth and revenue you can easily hire people and expand yourself.

answered Sep 17 '11 at 15:07
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Areshchanka Alexandr
49 points

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Equity Acquisition