Back in 2011, after 13 years spent building up his digital agency firm Baigent Digital, Martin Campbell felt a change was needed to improve his luck.

“Our margins were very thin and I’d reached the point where I wasn’t sure how to take the business further. We were in a bit of a rut and we needed solutions,” he recalls. “I thought an exit would be one but I also considered expansion through a partnership. I had no clear idea until a US software company approached us wanting to make a bid.”

The firm, Convio, was particularly keen on Baigent’s client base and, as such, valued the firm significantly higher than other interested parties. “They didn’t just want the clients, they wanted to maintain the relationships they had with me and my staff. They wanted us to stay around,” he explains.

Board seat

Campbell did not receive an equity stake but was given a board seat, a head of division position and a three-year earn-out agreement. “I hadn’t really given that much thought to remaining but I felt that I had achieved the sale I wanted, a great valuation and that my remaining on board was a vital part of this deal,” he says. “I continued with the group and never found it that different to when I was the head of Baigent. There we had an excellent major investor who I was accountable to and who was very direct! Now I was reporting to a CEO in Texas who I spoke to every couple of weeks. We were a UK subsidiary so we retained a lot of our independent entity. What was frustrating, and what both parties should have spent more time on, was aligning our priorities.”

Campbell says he enjoyed the resources of a bigger company as well as experiencing a “huge learning opportunity of how bigger businesses worked”. 

Put on hold

However, after Convio was itself bought out six months later by Blackbaud the experience soured. “We were not a priority for the new company and although they wanted us to stay initially our earn-outs were changed,” he says. “I felt our initiatives and team building were also being put on hold and when I got offered voluntary redundancy I took it.”

Helen Curtis of solicitors Gannons says Campbell would have been unusual in retaining an equity position after an exit. She says the clear majority of the acquirers she works with want to gain 100% of the ownership after a sale. “If an owner does want to retain a position then they have to make that clear at the very early stage of negotiations,” she states. “But you run the risk of lessening the appeal of your business to potential buyers if you do so. They want the control.” 

Step down

Mark Hardwicke, managing director of Invenio Corporate Finance, agrees: “Generally speaking, entrepreneurs don’t want to stay, they want to be out. They very rarely keep a slice of equity, or take a seat on the board. Going from entrepreneur to just an employee is quite a step down,” he states. “It is common for a new owner to want stability and so there are earn-out packages agreed for them to stay for a short period of time. But problems can arise if the new owner wants you to spend vast sums on new machinery or a new layer of management. They may be decisions you don’t agree with and you are worried it will hit company profits and your earn-out targets. Entrepreneurs don’t like this.”

Keep an open mind

Campbell, who has since sold another firm, software company Ormsby Street, and is now chief commercial and strategy officer at Hubbub Fundraising, says owners need to keep an open-mind when they head for the exit. “You don’t know who is going to acquire you, the type of company, whether they want you to stay or leave,” he says. “You need to think past the deal. I wish I had spent more time with the people I ended up working with at Convio before the deal was signed. I would have been better prepared. I also would have ensured that my earn-out would have remained valid after Convio’s sale.” 

His final piece of advice: “If you do stay under your new owner try and grab the positive experiences but if you are just there to keep things ticking over it may be a struggle. That’s not the entrepreneurial dream!”