Managing internal stakeholders

Internal pushback to M&A

It is common for employees or executives at a company to push back on M&A. Pushing back on acquisitions may reflect a strategic or tactical insight. Alternatively, pushing back may reflect a lack of understanding or pragmatism about the inability of the company to do everything with the limited resources it has. Or, it may reflect jealousy around the acquisition price and financial outcome for the founders of the company you are buying. In general, more junior employees or company old-timers tend to push back more on M&A than experienced executives who have seen the value of doing acquisitions well at another company.

The set of companies you are looking to buy should be considered an internal secret and not something widely discussed with the entire company at an all-hands. This should be kept quiet because:

1. Word may leak. This can cause a number of bad scenarios including (i) competitive bids on the startup being acquired (ii) disruption of that company’s operations—for example if one of your employees tells their friend at the company that you are thinking about buying them (iii) lobbying of regulators by your competitors to block the acquisition.

2. Most employees won’t have context. Many of your employees may lack the broader strategic context, or experience, to understand how M&A may be used as a tool. They may also not understand that you may talk to ten companies but only buy one, and there is the potential for employees to get upset or worried about acquisitions that will never happen. Why cause organizational churn or questioning for no reason?

3. It makes it harder to bid on the same company again later. If you publically try to buy something, and then publically pass, it may become harder to justify to your team another attempt on the same company. Strategic imperatives, financial models or other items may change and it is best to maintain flexibility.

4. Members of your team may try to inappropriately block the acquisition. See below for common objections.

Dealing with objections

Common objections from the internal team may include:

1. Couldn’t we just build this ourselves for cheaper? Why buy a small team with a nascent product for $20 million when that same $20 million could allow us to hire 100 people for a year?

Answers may include:

  • In reality there are lots of things your company could do but it is limited by resources (including the ability to hire that many people quickly). If you do not buy the company, this strategic objective will not get done or will be delayed dramatically.
  • You are also buying a team that has thought deeply about the area and will not need time to ramp on it, as well as brings it own unique insights to bear.
  • The company being bought will bring its own leaders that will help drive this initiative forward.
  • The financial value if this team succeeds and gets things done a year earlier may be worth much more than the $20M being paid for the company.

2. We are going to crush this competitor! Why would we buy them? In some cases it does not make sense to buy any competitors and to indeed outcompete everyone in the marketplace.

Your answers to this objection may include:

  • This competitor has been driving down margins by competing for every deal. By taking them off the market we make back the value simply by having less competition.
  • This acquisition is accretive, e.g., we are trading for 10X revenue but only paying 5X revenue for this competitor. So we gain market share, grow our market cap for more than the stock we spent to buy the company, and may also lower our costs or get efficiencies via scale.
  • This buy is defensive. Buying this competitor will block large-scary-co from entering this market. If large-scary-co cannot get a toe-hold via acquisition, this market is ours long term. If they decide to buy this competitor and put resources behind it, we will have real competition for once.

3. Does the team really meet our bar? There are concerns on the engineering team that this team does not meet our hiring bar. A friend of one of our tech leads says the team is not very good.

Response (for a team acquisition):

  • We will continue to maintain our high bar. We will be taking the team through our interview process and will make the acquisition contingent on us bringing on board a big enough subset of the team. We will not add (or will give a short trial period to test out) employees that we are uncertain about.

Response (for a strategic acquisition):

  • We are buying this company for its core asset and market share versus just the team. Once we start the integration we will assess each individual team member and decide where, how, and whether to slot them into our organization. If anyone on their team wants to switch teams after the acquisition, they will need to do a full interview circuit with the team they want to switch to. This will ensure our high bar is maintained.

4. It will take a long time to integrate. Don’t we need to port over their stuff? It will take a year or two to rewrite their code for our stack! We could have our own team build the same thing faster.


  • We do not, and will likely not, have the headcount for this project in the near term. Given that this team has a live product we can distribute, we think it is faster to buy this team and either (i) let them continue on their own stack or (ii) have them port over to our infrastructure.
  • In parallel we will have a product in the market and will attract customers or scare off or block competitors.

5. What if the acquisition fails? All new projects can fail and some will certainly do so. What if this acquisition is one of those failures?


  • We do not have a 100% success rate for our internal new products and that is by design. If nothing fails it means we are not taking enough risk. Similarly, for acquisitions some will work out and some will not. However, if enough of them work out they will more than pay for the acquisitions that do not. No matter what, we will also end up getting talent into the company that might be hard to hire directly otherwise, simply due to the risk profiles of the people involved.

M&A interview process

One of the key areas that matters to your employees (outside of price, which may cause its own gripes) is whether new acquired employees meet the bar (particularly in the case of a team buy or small product buy). This gets complicated if your team is largely composed of more junior, less experienced people whose only professional experience (outside of internships) is your company. In general, less experienced employees may not do a good job of interviewing senior people. If the company being acquired is a team of very senior engineers from, for example, Google or Facebook, it is possible the senior engineers will not pass the interviews with your more junior team. There are a few ways to ensure that the company being acquired gets a fair shot. For example, for engineering interviews:

1. Standardize interview processes and questions per the “Recruiting, Hiring, and Managing Talent” chapter of this book. If you do not have a consistent set of questions hiring feedback may be arbitrary. Make sure your interview questions work well for senior as well as junior engineers—sometimes coding questions can reflect recency of a computer science degree (more emphasis on certain aspects of theory for example) versus ability to code.

2. Put mainly senior engineers with cross-company experience on pre-set panels for M&A. This ensures your employees will have the context and bar to interview and assess more senior hires.

3. Remind the interview panel that most of the people who are interviewing were just told that their company is for sale, and may not have had time to prepare for interviews.

4. Do references (if it makes sense to do so) and weigh them highly. The employees of the company being acquired do not have a say in where they are going (their company’s founders are driving the acquisition) and they are unlikely to have interviewed recently. As such, they are unlikely to have prepared for interviews with your team and they will also lack context for the acquisition. As such, discount some standard interview items like “do they have passion for our company” that you may have if you hired someone off the street.

You can do the analogous situation for other company functions.