COLLABORATION MODEL
SCORING AND RECOMMENDATIONS

	Scoring	Weight	How to ensure Success and Mitigate Risk
Strategic	Shared objectives		Unless the acquisition would contain deferred payment arrangements, few shared objectives as both the buyer and seller(s) will attempt to reduce any acquisition risk to the maximum extent possible
	Clearly defined collaboration scope		Focus on limited joint collaboration scope consisting increasing market reach for the products and services of the startup and enlarging the product portfolio of the buyer, but carefully design any post-acquisition earnout and performance targets
	Freedom to operate		Ensure maximum freedom to operate from incorporation to exit as buyer will be strongly focused on satisfying itself that the startup has maximum freedom to operate through absence of IP assignments to clients and restrictive undertakings towards clients
	Risk sharing		Reduce pre-acquisition risks by allocating as much risk as possible to the buyer, while taking into account that the buyer will attempt for the sellers to bear as much risk as possible
	Worst Case planning		Agree on acceptable risk allocation in respect of the sold business, while agreeing to appropriate incentives and rewards for any post-acquisition earnout or performance arrangement
	Senior Executive Support		Ensure strong senior executive support at the buyer to ensure successful acquisition design and negotiations, with powerful decision-makers acting as executive sponsors and intervening to deblock potential negotiation issues
Business	Business Value proposition		Increase market reach for the products and services of the startup, while enlarging the product and service portfolio of the buyer
	Due diligence		Prepare for due diligence throughout the life cycle of the target, anticipating an extensive due diligence of the target and its business by the buyer, with a primary focus on IP ownership of products and services and the absence of non-compete and other restrictive undertakings of the target
	Optimal legal/ business structure		Craft a well-designed and negotiated purchase agreement, with appropriate risk allocation between the buyer and sellers, preceded by a detailed term sheet covering all acquisition aspects to ensure alignment between the parties
	Partnering metrics		Other than M&A risk allocation negotiations, focus on fair and balanced post-acquisition earnout or performance targets as key metrics and targets for the target’s management team
	Rewards/ penalties		Carefully negotiate representations and warranties and indemnification arrangements, as it is Inherent in any acquisition for each party to shift as much pre-acquisition risk to the other party
Operational	Decision-making processes		In general no requirement for sophisticated decision-making processes, other than to structure appropriate governance mechanisms to deal with potential collaboration issues during a potential earnout or performance period for the (active) sellers
	Communication		Ensure communication lines remain as open as possible during the due diligence and negotiation phases at the senior executive and transaction team levels, to ensure that any transaction related issues are swiftly dealt with
	Quality checkpoints and review		Design and agree appropriate checkpoints and review during the due diligence and negotiation phase
	Change management		Structure appropriate change management procedures for post-acquisition earnout or performance targets, primarily to deal with unexpected collaboration issues between the buyer and management, in particular if earnout dependent on buyer behavior
	Issue Escalation Mechanisms		Include friendly issue escalation mechanisms to avoid immediate litigation in the event of post-acquisition issues, such as third-party claims or other warranty related issues
Cultural	Collaborative mindset		Limited collaborative mindset other than increasing market reach for the products and services of the startup and enlarging the product portfolio of the buyer, and ensuring incentives and retention for key people at the target level
	Dedicated alliance managers		Ensure availability and commitment of dedicated business development personnel at the buyer, for purposes of managing the entire M&A process and escalating any potential unresolved negotiation issues to senior management
	Joint decision-making processes		In general no requirement for sophisticated decision-making processes, other than to structure appropriate governance mechanisms to deal with potential collaboration issues during a potential earnout or performance period for the (active) sellers
	Appropriate incentives		Ensure sufficient autonomy of beneficiaries of post-acquisition earnout and performance payments without undue interference of the buyer, with appropriate penalties for the buyer if such autonomy is not respected