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Great companies are bought, not sold
How a sale process runs
A sale process usually runs through a bank, or the founder leads it with the CFO. They list targets, and the board decides who to approach. Picture twelve targets: six agree to review the company and meet management, and offers start arriving, two and then three more, for five in total.
Then everyone puts in a bid, the field narrows to the final two, and one more bake-off decides it. A company with several offers on the table goes for a high price.
Signs a buyer is circling
A company in demand can tell. People want to hang out with the founder, and founders of other companies call out of nowhere. Steve Jobs famously called Dropbox founder Drew Houston to hear what he was up to. Jobs had plenty of friends already, so the call meant a buyer was interested.
Why do competing bids raise a sale price?
When one buyer is at the table, that buyer sets the terms. When several are, each must worry about losing the company to a rival, and bids rise to prevent that. Economists Paul Milgrom and Robert Wilson earned the 2020 Nobel Prize in economics for improving the theory of how auctions work. Their work covers how bidders behave when they are unsure what the prize is worth.
How does a staged sale process work?
Sell-side advisers usually run a company sale in rounds. The first round collects non-binding indications of interest from many buyers, and management then presents to the ones that remain. The last round asks the finalists for binding offers with a signed agreement attached. Each round is meant to cut the field while keeping the remaining bidders competing.
Why did Dropbox say no to Apple?
Drew Houston has said in interviews that Steve Jobs wanted to buy Dropbox and that he chose to keep building it independently. Dropbox kept raising venture money for years afterward. It went public on Nasdaq in March 2018. The company's shares priced at 21 dollars at its debut.
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