What it means to be acquired by a holding company?

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chuppi
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Joined: Sat Jun 16, 2012 9:47 am

What it means to be acquired by a holding company?

Post by chuppi » Sun Aug 20, 2017 12:21 pm

I work for a VC funded, privately held 15+ year old company. I have been with the company for a long time and do have company stocks.
There is news that the company has been acquired by a holding company. I checked out the company and it has a portfolio of several companies. From their profile, they invest in companies that have potential, try to grow them and then sell or go IPO in a few years.

We are in a niche market and do have a great product. I think my job is quite safe unless they completely destroy the company. I love my job and would like to continue with it if I am allowed. If I end up losing my job, I am sure to find something else in a few months. I am on solid ground financially and so I am not worried.

Any idea what happens to my stocks? Will they buy back my stocks and pay me. Or will they exchange my current stocks with the holding company stocks? Holding company is also privately held.
Official announcement is coming soon and I don't have all the details yet.

drk
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Re: What it means to be acquired by a holding company?

Post by drk » Sun Aug 20, 2017 12:43 pm

The unsatisfactory answer is "it depends." You'll have to wait until the announcement.

chuppi
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Joined: Sat Jun 16, 2012 9:47 am

Re: What it means to be acquired by a holding company?

Post by chuppi » Fri Aug 25, 2017 11:48 am

Thanks drk. you were right. I just had to wait. There was no choice. I got the money for both options as well as stocks. options were paid as earned income. It is not a life changer but I am happy that I got something.
Now I am kind of walking in the dark with the restructuring.

Ron Scott
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Re: What it means to be acquired by a holding company?

Post by Ron Scott » Sat Aug 26, 2017 8:21 am

I think of holding companies as firms that own other companies for the medium to long term and manage with a hands-off approach. I don't think of them as acquiring with a short term exit strategy as you describe.

VCs will often acquire a company, dress it up without additional outside investment, and sell it off in 3-4 years.

In either case the devil's in the details and each acquisition has its own challenges. Aside from assuming business-as-usual is over, an outside can't predict events.

Sounds like you were treated well with your equity holdings. Acquirers usually pay above market for the deal and you'd have had to pay tax on the options exercises as ordinary income anyway. While there is no more opportunity for growth you got immediate liquidity at, presumably, a good price.

downshiftme
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Re: What it means to be acquired by a holding company?

Post by downshiftme » Sat Aug 26, 2017 3:12 pm

It's possible the holding company is buying the whole company, in which case they will buy your stock too. More likely, this deal is structured like another round of financing where the holding company injects some capital for partial ownership, your shares stay as they are, and the company is managed with a target of an IPO or exit by sale to another company in 3-5 years or so.

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dm200
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Re: What it means to be acquired by a holding company?

Post by dm200 » Sat Aug 26, 2017 3:25 pm

Look out for your own best interest and do not count on anything anyone tells you, how good a job you are doing or have done, or how great a product the company has.

It is very possible that if the short term "profit" is there, those profits could be taken quickly and the company goes down the drain.

chuppi
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Joined: Sat Jun 16, 2012 9:47 am

Re: What it means to be acquired by a holding company?

Post by chuppi » Mon Aug 28, 2017 8:57 pm

Thanks Ron, downshiftme, dm200
It looks like they are looking to grow the company, add value and exit in a few years. I heard that they might grant stock in the new company to some people. I am not going to count myself in that.
I like my job and the flexibility that comes with it. I don't think my job is at risk. I am staying put for now.

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