Mitigating the Risks of an Acquisition with Michael Cheng

Michael Cheng is an M&A Specialist who has had an extensive career that includes a former stint at Facebook as a Product Manager and his current role as a Lawyer. In this episode, Michael returns to the show to have an in-depth discussion around acquisitions. Michael shares his thoughts on why most acquisitions leave everyone involved feeling unsatisfied, and what he thinks should be done by both parties to mitigate the high failure rate of acquisitions. We also chat about the common grievances founders have after going through an acquisition, and the approach Michael recommends to mitigate those regrets. Michael also shares insights on why it’s harder on an open-source company to be successfully acquired if they are in between being a purely services-based or SaaS company. 

Highlights:

  • I introduce returning guest Michael Cheng, whose illustrious career spans roles as a Product Manager for Facebook, a Lawyer, and an M&A Specialist (00:22)

  • Michael gives some background on his career history and why he’s pursued so many different roles (01:00)

  • Michael and I discuss the bird’s eye view of the steps it takes to get acquired (02:23)

  • Why most acquisitions fail (06:11) 

  • The common grievances that sellers have after going through an acquisition (08:11)

  • Michael’s thoughts on the likely outcomes for acquisitions of open-source companies (10:28)

  • What open-source founders can do to favor a successful outcome when approaching an acquisition (13:32)

  • How Michael thinks success should be measured when evaluating the outcome of an acquisition (17:56)

  • Why looking at the open-source community of companies being acquired is so crucial and often overlooked (22:13)

  • How the due diligence process is different for an open-source startup versus a SaaS company (25:20)

  • Michael describes how each core function in a company is affected by an acquisition (28:12)

  • The advice Michael would give to founders to help them make peace with the outcome of an acquisition (33:42)

  • How you can connect with Michael to learn more (37:02)

Links:

Michael

Chris Hill