Clover (A)

By Mark Leslie, Mike Speiser, Julie Makinen
2017 | Case No. SM283A | Length 13 pgs.

Clover Network’s founders didn’t see the curveball coming at the end of 2012. The two-year-old start-up had just nine employees. It had dumped its first business idea, pivoted from its second, and was working hard on a new product: a tablet-based cash register with built-in credit card processing. Large credit card payment processing companies had started noticing Clover and one had just agreed to pre-order $2 million of Clover hardware. It was Clover’s first such deal. But around Thanksgiving, Clover learned that First Data—the card processing industry’s 800-pound gorilla—also was interested in Clover’s technology. If it could bring First Data on as a customer, Clover would have a pipeline to a huge number of retailers. In early December, one of Clover’s founders received a 2½-page letter from First Data. He had expected a proposal to buy and distribute Clover equipment, maybe with a small equity investment. Instead, First Data said it wanted to acquire “no less than 75 percent” of Clover, and close the deal by December 31. Was it time to sell Clover?  The case highlights how a start-up decides to respond to an unexpected buyout offer and how it proposes to structure the deal.

Learning Objective

The teaching objectives of the case include: 1) Strategic thinking around buyout offers: How can a tiny team, so early on, justify what it is worth to the buyer? 2) Analysis of when is it right to sell, and why. 3) Management skills: With whom should the startup’s founders consult as they wrestle with this decision? Who in the company needs to know? 4) Negotiating skills: What deal terms to propose that make sense for founders, investors, employees and the buyer.

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