Part B describes the challenging negotiations that Davis went through with VMware to finally arrive at a price before both sides reached the dreaded “deal fatigue.” After presenting the price to his board, one board member asserted that he wanted to bring in his own lawyer to negotiate the remaining terms of the deal. At that point, the board member’s request felt as if it had the potential to undermine the hundreds of hours Davis had spent in due diligence and negotiations over the previous weeks. After coming this far, he was going to have to decide how hard to push back on his own board member to fight for the issues that were of highest priority to him, versus continuing to push the deal terms towards what could possibly be the breaking point.
Also see E571A: Virsto (A).
This case presents students with several strategic questions associated with founding, building, and managing a technology company from the ground up. Among the challenges a founder must face are the tricky and uncertain decisions associated with going to market with imperfect information. What are the pros and cons of getting to market more quickly with a second-tier player versus waiting to partner with the clear and dominant leader in the space? The case also deals with the challenging issues associated with an acquisition, particularly when the founder has invested so much of his/her personal and emotional wealth in the process of building the company. Davis receives a low-ball offer from VMware and must face the decision of how to proceed based on what is best for his employees, his investors, and himself. After going through a divorce as the result of the stress he placed on his wife and family in starting this company, as well as investing much of his own personal wealth, these decisions are not to be taken lightly. One wrong step, and Davis could risk losing it all.