Building a company for the purpose of selling it is a proven strategy for a fast payoff. Like any asset, the more attractive a business is to potential acquirers, the more likely it will be purchased. Focusing on the key elements that larger brands examine when they consider an acquisition is crucial for obtaining the best price and for establishing a corporate brand that distinguishes itself from its competitors as a valuable asset. There is a strong argument that can be made for preparing to sell your company from Day 1 by strategically positioning your company in a growth industry where merger and acquisition activity is likely.
While it is impossible to know what the future holds, startup business owners can bank on the fact that potential future buyers will be evaluating their financial statements in addition to the value of their corporate team, working partnerships, marketing efforts, patents, and reputation. The good news is that business success requires careful attention to these same key ingredients. Paying attention to details and aiming for success will pay off.
When to Sell
The popular assertion that time is everything could not be more true than it is for mergers and acquisitions. With that fact in mind, startup companies must build the company to an optimum level of profitability while matching their willingness to sell with that of a buyer in the market for an acquisition, always assuming that everybody approaches the transaction wondering “what’s in it for them”. Depending on your reasons for selling and how long you are willing to wait for the best offer, you should understand that the desirability of buying your company will peak at some point in time based on industry competition and other market conditions.
Many companies decide to sell when they believe they have reached a strategic pinnacle and will need substantial capital to reach the next level to remain competitive and grow. Instead of seeking more venture capital or taking on equity partners, many business owners decide to sell when they believe they have reached a certain level of success and can best leverage company assets. As reported by Reuters in the article, Bain to buy Blue Coat for about $2.4 Billion, an example of perfect timing can be witnessed by Bain Capital’s acquisition of the cybersecurity leader, Blue Coat Systems Inc., just as rising concerns over security breaches started to peak. Then Blue Coat acquired Elastica soon after being acquired by Bain.
Leveraging Your Corporate Team
The team of people that run your company are the single biggest asset you have. For this reason, it is critical that hiring the best people be a company philosophy. Key functions should not be outsourced. If you are planning on saving money in the budget, be sure that staffing is not where you cut corners. In technology circles specifically, it is widely known that the main reason for buying another company is to reap the benefits of bringing onboard a team of highly trained engineers and other technical staff. According to CNN Money, this mindset is so common, that it is called “acqhiring” in industry circles.
It is never to soon to begin preparing for the future. By fully understanding how a business is valued, a strategic plan can be formed that will maximize profits when it is time to sell. As is always the case in most business transactions, being prepared to take advantage of opportunities when the time is right, can make all the difference.