Wes Winham was a co-founder and shareholder in PolicyStat, a software company that helps hospitals keep track of their Standard Operating Procedures (SOPs), including everything from dress codes to how to handle life and death procedures.
The platform was sticky with more than 99.9% of contracts renewing each year, which is why PolicyStat was quick to garner multiple offers of 3.5 – 4.5 times their annual recurring revenue of $5 million.
Winham and his fellow shareholders selected an acquirer, countersigned a Letter Of Intent (LOI) with a 45 day diligence period of exclusivity (i.e. “No Shop” Clause) where the PolicyStat stat team agreed not to continue to negotiate with their other suitors.
Negotiations were progressing well right up until they began discussing the terms of an earn-out. The tone of the meetings went from friendly to adversarial, which is when Winham and his fellow shareholders decided to walk away from life-changing money. In this episode, you’ll discover:
- How to compare and contrast LOIs
- The danger of letting an exclusivity clause expire
- Three secret hacks to evaluate the cultural fit with a potential acquirer