Juicy Auctomatic Acquisition Notes
Congrats to the Auctomatic team, on a fine acquisition. I followed the blog of one of its founders, initially because I was fascinated with Y Combinator.
Because the acquirers were a small and public company (that is the acquisition is material even though it’s only a $5m transaction), the merger agreements are public. So let’s take a look at the anatomy of a small acquisition:
The total purchase price was $5m, as Michael Arrington reported.
That’s structured as $1.2m in cash on day zero. And another $800k on the first anniversary.
The rest, is equity; structured as $1.02m worth of Live Current Media shares on day zero, and then $660k on the first, second and third anniversaries of the deal.
How did Y Combinator make out? The distribution schedule in the agreement says the firm owned 3.42% of the company - or shares worth $171k. Depending on their outlay (whether they put in $10k or $15k) that’s roughly a 10-15x return (on a very small outlay admittedly).
The founders each had around 21% of the company, valued at just a little bit north of $1m. I would never underestimate the power of the $1m mark in psychological value. I know of another acquisition where the price was set basically so that each founding member got $1m.
The notorious Chris Sacca had 2.42% but under liabilities it also says the company owes Sacca Consulting $30k (more than the founders were paying themselves in salary).
