I am negotiating a deal and I really need some advice on the pros and cons of the deal that has been suggested to me.
I have a startup company with radically innovative technology. I want to merge with a larger company, which has an interesting customer base and credibility in the market.
We cannot agree on a price of a merger as none of us know the value of the technology (notoriously difficult to put value on). Their suggestion is then as follows.
We create a joint venture together that we own 50-50, be being the CEO and them having the Chairman of the Board. The joint venture will not own any technology and any technology developed will automatically belong to my company. The joint venture can however freely sell my software, paying a royalty to my company for each sale. Their company will finance will put financial resources into this company so it can grow quickly.
My questions are pros and cons with regards to the following issues:
- How will the price of an exit be affected by this structure?
- How will it affect my company becoming a partner with for example a competitor of their company?
Any other potential issues with such a structure?