Elephbo founder Nicolas Huxley thinks of his acquisition journey in two parts: before his six-month-long deal collapsed and after, when chaos ensued.
Originally, a retail partner was going to acquire Nicholas’s six-figure ecommerce brand. They promised to continue selling sustainable backpacks and accessories sourced from Cambodia. But a sudden crisis forced the buyer to drop out before Nicolas signed the asset purchase agreement (APA), nixing their verbal deal.
“We had a letter of intent signed. And after several meetings, I shook hands with the CEO and the president and agreed on all the terms. We went out, had a great dinner, and said cheers to the whole deal,” Nicolas says.
In a few days, Nicolas’s celebration became a panicked scramble to relist Elephbo on Acquire.com. Though he dreaded starting over, he knew he wanted to close a deal. Nicolas persevered and secured a six-figure sale.
Read on to see how Nicolas learned to add urgency to his deals and back up trusting relationships with binding documentation.
From Backpacking to Bootstrapping
Though Nicolas studied international business at university, he felt inspired to build a startup during a semester break. He backpacked across Southeast Asia, and in Cambodia, Nicolas fell in love with the people and culture.
Everywhere he went, he saw people demonstrating kindness and hospitality. Unfortunately, he also saw piles of plastic waste cluttering the streets and sidewalks.
Having grown up in Switzerland, Nicolas wasn’t used to seeing this level of waste. But his experiences in Cambodia inspired him to give back to the community by starting a small recycling program.
“I envisioned a project where I could give something back. We’re very privileged in Switzerland, very lucky. This side project was a way for me to distribute some of my privileges to others,” Nicolas says. “I drove around Cambodia, got to know the people, and told them, ‘Hey, if you get plastic and give it to me, I’ll pay you.’ That’s how it all started.”
As Nicolas’s recycling initiative grew, he noticed most of the plastics turned in were cement bags from construction sites. The look and feel of the material fascinated him, and enough bags came in that he wondered how he could repurpose them.
“We discovered it’s a cool material to recycle, and it looks quite cool by itself. We don’t need to print on it. We don’t need to make plastic flakes out of it and reprocess it. It was quite easy to just clean and reuse it for products,” Nicolas says.
Though his backpacking journey ended, Nicolas kept running the recycling program from Switzerland. Soon, he finished his bachelor’s degree and started a full-time job at Ernst & Young in Zurich.
While working, he experimented with product designs and found manufacturers to repurpose the cement bags into backpacks. Once he had a prototype, Nicolas knew he wanted to quit his job and build Elephbo into a full-time ecommerce startup.
“I realized [Ernst & Young] just wasn’t my world. It was interesting to see all these different businesses, and I learned a lot. But I realized the impact was just not big enough for me,” Nicolas says.
How Saying Yes to Everything Leads to a Lack of Focus
Using his salary and savings from Ernst & Young, Nicolas bootstrapped Elephbo for two years before securing a quarter-million in seed funding at the end of 2018. He used those funds to hire six employees, who helped him run two production plants in Cambodia and Bosnia.
Nicolas admits that Elephbo suffered many stops and starts early on. He rushed into production, eager to start producing sustainable backpacks and accessories. Looking back, the founder believes his “idealistic vision was just too strong” and prevented him from following a step-by-step bootstrapping process.
“Social impact and sustainability were the most important factors to me. But at that time, I should have balanced it more with product development,” Nicolas says. “I should’ve looked at the quality of the product and found the right production partners. We changed partners a couple of times, leading to a lack of quality, higher return rates, more repairs, and higher customer care costs.”
Once he found a good production partner and secured more funding, Nicolas launched a slew of backpacks and bags on Elephbo’s site. He scaled the business with frequent product launches and new contracts with retailers around the world.
Whenever these brick-and-mortar stores asked Nicolas about stocking his sustainable products, he immediately said yes. His products soon appeared in retailers across Europe, Asia, and North America. No matter how full his plate, Nicolas agreed to every new opportunity. But ecommerce sales slowed in Switzerland, giving the founder a reality check.
“I’ve thought a lot about my lack of focus during that time. The pressure I put on myself, saying, ‘Hey, we need to get bigger, we can grow through new products,’” Nicolas says. “Admittedly, we scaled a lot in 2019 and 2020. We tried focusing more on ecommerce. But at the same time, we received all these inputs and requests from retailers and distributors. We took them all on, which was a mistake. I wasn’t able to say no.”
He adds, “Looking back at our scaling process, we should’ve focused solely on ecommerce. I wish I’d said no to the global retail opportunities until we scaled the business more in Switzerland. We did eventually, but it just took more time.”
To help scale domestically, Nicolas cut back on new product lines to focus on his most successful item: backpacks. He narrowed Elephbo’s offering towards the end of 2020 after the pandemic decimated his sales in physical stores. Before Covid, Nicolas had also planned to launch the ecommerce site in a new German market to attract more EU sales. But he had to cancel those plans too.
“Covid was difficult for us because our retail partners struggled, and we weren’t strong enough in ecommerce yet to compensate for it,” Nicolas says. “All these problems bubbled up as we worked on entering a new market.”
Renewed focus on scaling the ecommerce site and Swiss market helped Nicolas bounce back in 2021 for a record year. He’s proud of his team’s recovery from the pandemic. But by the start of 2022, Nicolas felt emotionally drained from the hours he’d invested into the recovery.
“I put so much energy and time into it that I lost a little bit of the fun. I didn’t burn out, but I felt like I didn’t have the energy anymore,” Nicolas says. “And then I realized we had a really great year, and it was the perfect time to showcase our growth. I could use our success to exit and pursue a new path.”
How to Salvage a Failed Deal
Before listing his business on Acquire.com in February 2022, Nicolas assembled his ideal buyer profile. Best-case scenario, this buyer would keep the business in Switzerland, and they’d share Nicolas’s sustainability values.
Once Acquire published his listing, Nicolas also contacted his retail partners to gauge their interest. He hoped one of them would bite because, after working with him, these partners knew who he was and how he operated.
“It was actually quite successful. We got a lot of answers from these retailers. Though, we soon realized you can put eighty percent of them aside because they’re not willing to put money on the table,” Nicolas says.
After negotiating three serious offers over four months, Nicolas signed a letter of intent (LOI) with one of the retail partners. He called it a “great agreement,” one that just needed to go through the final stages of due diligence and APA drafting before it wrapped.
“Then something extremely painful happened,” Nicolas says.
Right before Nicolas’s lawyers finished drafting the APA, an internal legal issue arose at the company, causing the CEO and president to get fired.
“I just sat there, thinking, holy fuck, man, what is this? We have to start the whole process over again?” Nicolas says. “That was painful because my whole team knew about the deal. We were very transparent about the whole process, and we’d already communicated that the deal completed. And then our negotiation partners were suddenly gone.”
The new CEO, unfortunately, wasted no time telling Nicolas the deal was off. Though the buyer had signed an LOI, it wasn’t legally binding like an APA. If Nicolas had asked lawyers to enter the process and start drafting sooner, perhaps he could’ve held the new CEO accountable in court. But there was nothing he could do now but live with the consequences.
Not only did Nicolas’s employees know about the failed acquisition, but word spread in Swiss startup circles too. Nicolas had already taken the listing off Acquire and rejected the other offers from prospective buyers. Now, six months after beginning the process, he had to list Elephbo again and start a new round of negotiations.
“Switzerland is super small, so everybody talks and knows what’s happening. And now, during round two, all these potential buyers have possible bias. They’re wondering, ‘Hey, what happened there?’” Nicolas says. “We were in a very weak negotiating position. It was very unlucky for us.”
Another founder might’ve given up at this point, seeing the failed deal as a sign that it wasn’t meant to be. But Nicolas rallied and prepared his listing once more, shrugging off his misfortune to focus on finding a new buyer.
Turning a Devastating Loss Into Your Biggest Gain
In late September, Nicolas started fielding offers again. Several came from Acquire.com, and a newly-hired broker sent other contacts to him. But his final buyer, Surs, discovered him through a mutual friend who set up a meeting between the two.
The initial meeting felt less like Nicolas and Surs were negotiating and more like they were “brainstorming a collaboration.” Surs helps digital brands scale in Switzerland, and Elephbo was a perfect potential business to grow.
Nicolas and the CEO talked more about Elephbo’s future than the hard details of the deal. By the end of their in-person meeting at Surs’ office, Nicolas felt he knew more about their operations, company culture, and how Surs would help his startup.
It shouldn’t have come as a surprise to Nicolas when during negotiations the CEO also asked Nicolas to join the agency. The buyer recognized his innovation and communications skills and asked him to help fulfill Surs’ mission.
Nicolas had entertained a few ideas about his next steps before exiting. But Surs’ mission resonated with him. Plus, it would allow him to oversee Elephbo’s scaling without dealing with its operations.
“Switzerland is very closed. We have a lot of special regulations, our own currency, and four languages in a tiny market. But what’s interesting is that it’s a market with extremely high buying power. The average wage is over six thousand US dollars per month. But many brands don’t come to Switzerland because they don’t think it’s worth the effort of getting into the market for only nine million people,” Nicolas says. “Surs has specialized in it and wants to support brands that come into Switzerland.”
Now that Nicolas knew he was working for Surs post-acquisition, the founder felt he’d lost a bit of his bargaining power. He wanted to close the deal on good terms, and he wishes he’d brought someone else in to be firmer in negotiations than he was.
“If I were to sell a company again, I would bring in a bad cop. Somebody who has more of a ‘take it or leave it’ attitude,” Nicolas says. “You could feel the power shift from me to him in the small nuances of our negotiations. I wanted to find a good agreement and work together, so I was more willing to compromise.”
Despite his negotiation struggles, Nicolas closed the deal in January for six figures. Nearly a year after he listed, the founder sold his company for an incredible amount. And he secured a new job out of it, which he could dedicate himself to after the deal.
Learning and Letting Go
Nicolas knows his first failed sale could’ve used more urgency and legally binding documentation to help it close quickly. But he’s actually adopted a more relaxed attitude after his acquisition experience.
“It takes much more to make me nervous now. I’ve got deeper confidence in myself and in the world, because I know things work out if you try your best,” Nicolas says. “Last year was very tough because of very big ups and downs, but in the end, everything worked out.
“I was reminded that even though my deal busted and my second round could’ve failed too, life goes on.”
When disaster strikes, it’s tempting to crumple up your dreams and throw them in the trash. But Nicolas proves that even the toughest lessons can help you succeed.
How Do I Sell My Ecommerce Business?
You can sell an ecommerce business within your professional network, with the help of a broker or banker, or on a startup acquisition marketplace like Acquire.com. We’re here to provide all the support you need to close a life-changing deal.
Want to get started? Sign up for a free sellers’ account now and get to work crafting the perfect listing. After our curation team approves it, your business will hit the marketplace and receive views from thousands of vetted buyers. Once they see your connected metrics and request access to learn more about your startup, let the negotiations begin.
What Causes Acquisitions To Fail?
Every acquisition involves risk for the buyer and seller, and the best thing you can do is prepare for the unexpected. Even small changes in circumstance can kill your deal, so draft a contingency plan. Prepare to list your startup again, keep a list of other buyers who expressed interest, and try to seal your deal legally as soon as possible.
Watch out for the following actions from buyers, which can cause acquisitions to fail:
- They experience financial issues that prevent them from funding the deal.
- They don’t plan how to integrate your business into their existing operations.
- They ignore company cultural differences and try to force integration between your employees and theirs.
Meanwhile, the following behaviors from you could also halt or kill a deal before it’s official:
- You enter negotiations with completely different expectations from your buyer.
- You don’t cooperate with post-acquisition transition plans.
- You don’t prepare for unexpected external factors (like what happened to Nicolas).
- You don’t clean up your financial, legal, HR, technical, or operational paperwork for due diligence
With luck, your acquisition will run smoothly and you won’t have to worry about these scenarios killing your deal. But it can’t hurt to be prepared.
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