Wednesday, August 3, 2011

Congrats, CMO! Your startup has been acquired at 10x revenues. You now have enormous goals to hit. And, your PR agency has been terminated.

By Joanna Kulesa
I’ve seen this over and over in my years of running PR agencies in Silicon Valley. Entrepreneurs and marketing executives work with agencies to help put them on the map, develop their brand as ‘one to watch,’ get them short-listed with key analyst firms, and win all the right awards. When consolidation begins, they’re one of the first to be considered for acquisition by the ‘big guys.’ Cisco, CA, HP, Sybase, Dell and EMC, to name a few, have acquired our clients.

The acquisition goes through. Everyone is joyous. And then it settles in. You go from owning the entire marketing function for your company to relying on a large marketing organization that may regard your product as a mere ‘blip’ on the radar. Your success is number one priority for you; however, global marketing organizations need to contend with hundreds of products, and tens of internal clients.

Your company got acquired because it filled a crucial need for the acquiring company, completed a missing component of their suite, or helped them gain entry into a new market. Now, you’ve been given big marketing and revenue goals to hit. And, the acquiring company has – as a matter of course – terminated your PR agency. It happens almost without fail that all existing vendor agreements are cancelled at the close of an acquisition. It isn’t personal. It’s what acquiring companies do.

Here’s the rub. Why do CMOs and CEOs let this happen? You’re burdened with reaching aggressive goals and milestones, yet you’re losing an important part of your team. There are many, many important items to be negotiated during the acquisition process. I would argue that, if you feel strongly that your PR agency has played a key role in the growth of your business and brand, this is a negotiating point worth ‘going to the mat’ for.

A very large technology company bought one of our clients in recent years. They are one of the first companies to chart a different course. They’ve kept our agency onboard even though the parent company has an excellent global agency of record. We have continued to act like the aggressive startup the acquirer first fell in love with and it has been enormously successful. Both parties have progressive executives who innately understand the relationship and importance of the team as a whole. It’s a valued ‘team’ relationship; not your typical ‘vendor’ relationship.

Here are three things to consider before agreeing to your new MBO’s at an acquiring company: 1) Which of your vendor relationships can’t you live without in order to achieve your goals (and ultimate payout?) 2) Who on your startup marketing staff is essential to that success? And, 3) Is there a growth path for you at your new company once the typical 18-month payout is completed?

Joanna Kulesa is principal of Kulesa Faul, in San Mateo, CA. Kulesa Faul focuses on public relations, social media and communications strategies for enterprise software and consumer technologies companies—