It may seem strange to see Oracle acquire Eloqua for $811m just a few months after their IPO.
But it’s not strange at all. I am 95% sure talks at some level were going on for quite some time, long before the IPO. And 80% sure, a soft offer of less than $500m or so was made before the IPO.
It’s just that the pre-IPO offer wasn’t good enough, so the IPO was the BATNA. The Best Alternative to a Negotiated Agreement. Then, after the IPO, the acquisition price was set. It had to be 25-35% more than the trading price to clear. And So It Was.
I think if you are doing a SaaS company, you’re going to be in a lot of BATNA situations. While we all sort of intuitively understand BATNA, but I think we also tend to make mistakes here as driven founders, with a lot of ourselves and our sweat in our companies. Because BATNA is a concept developed by dispassionate professional negotiators, which it’s hard for us to be sometimes
- Your super-happy customer asks for a Year 2 discount for No Reason. Do you tell them it’s your way or the highway? BATNA. If you tell them that, firmly, with no wiggle room — you better be ready to lose them. Probably, actually, a terrible idea in the early days especially. Because SaaS Compounds.
- After an 18-month Pilot Period, Your Great Logo Customer Sends the Deal to Procurement, That Insists On Another 20% Off. Ugh. Your business lead and you already agreed on the deal. But procurement needs their ounce of blood. How firm do you hold? BATNA. Probably, you should cave. But you’ll feel it’s wrong.
- Your Channel Partner, Who Has Never Done Much of Anything For You, Asks For X% Of Your Revenue for Deals Through Their Base. Or They’ll Cut Off Access. Ugh. Sure, you’ll pay anyone 20% of a deal they bring to you. But this is highway robbery. BATNA?
- A Great Customer Wants a Deal That is Simply Unprofitable. Yes, it’s not fair. But how badly do you want that leader as a customer? How many more customers will that logo help you close?
- Your Partner Wants to Acquire You for an Inadequate Price, And Threatens To Acquire Your Competitor if You Don’t Agree. This one is hard. Eloqua was probably here themselves X months back. I’m sure Oracle also had the Pardot guys and maybe even Marketo and Hubspot into their gleaming Redwood Shores offices. Have a glass of wine or three, and think BATNA.
My only point is, be careful in these situations. Don’t let emotion get the better of you, or your notions of “fairness”. Personally, I walked in many of the above cases, which was wrong, because walking wasn’t the BATNA. Luckily, my colleagues often took over and pulled us back from the ledge
This happens all the time in SaaS. Take a pause, think of BATNA. Just take the best option, and move on. Especially because SaaS Compounds. The customers, the opportunties you lose to getting BATNA wrong … you lose not just them, not just the short-term revenues … but the much larger downstream revenues and opportunities they would have spawned …
Negotiation comic from here.
(Cross-posted @ saastr)