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 other than increasing market reach for the products and services of the target and enlarging the product portfolio of the buyer, bur carefully design any post-acquisition retention, earnout and performance targets
	Freedom to operate		Obtain satisfactory evidence of target’s maximum freedom through absence of IP assignments to clients and restrictive undertakings towards clients, and prevent the sellers of getting involved in a competing business for 2 to 3 years post-acquisition
	Risk sharing		Reduce pre-acquisition risks by allocating as much risk as possible to the sellers, while at the same time ensuring maximum retention of key management and staff of the buyer
	Worst Case planning		Agree on acceptable risk allocation in respect of the purchased business, while agreeing to appropriate incentives and rewards for any post-acquisition earnout or performance arrangement
	Senior Executive Support		Ensure strong senior executive support of both buyer and seller(s) 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 Enlarge the product and service portfolio, and ensure retention of the target’s talent pool through appropriate retention and earnout arrangements
	Due diligence		Perform extensive due diligence of the target and its business, with a primary focus on IP ownership of products and services and the absence of non-compete and other restrictive undertakings of the target, while preparing for diligence on the buyer in the event equity of the buyer is issued to (partly) fund the acquisition
	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 well as balanced retention and earnout arrangement as it is Inherent in any acquisition for each party to shift as much pre- and post-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 collaboration issues during a potential retention, 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, also in respect of post-acquisition earnout and performance arrangements
	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
	Issue Escalation Mechanisms		Include friendly issue escalation mechanisms to avoid immediate litigation in the event of post-acquisition issues, such as warranty related issues and post-acquisition performance issues
Cultural	Collaborative mindset		Limited collaborative mindset other than to enlarge the product portfolio of the buyer, and to ensure incentives and retention for talent pool at the target level
	Dedicated alliance managers		Ensure availability and commitment of dedicated business development personnel at the buyer and target, 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 at the target
	Appropriate incentives		Design and negotiate appropriate intervention possibilities for buyer in the event of unsatisfactory post-acquisition performance, while accepting an acceptable level of autonomy of beneficiaries of post-acquisition earnout and performance payments