Strategy: Don’t mention the E word

Many companies will face the dilemma of what to do once their feed investors decide its time to exit, but rather than embrace this reality they pretend it isn’t going to happen.. Above all, don’t mention the “E” word!.

The problem with pretending the E word doesn’t exist is that you will struggle to create and communicate a coherent commercial strategy. “We are going to focus on short term opportunities….but I can’t tell you why!”. It doesn’t sound very convincing, does it.!

To make matters worse, the same company may invest time and resources on winning work and developing technology that add no tangible acquisition value to the company. No matter how you look at this, it really doesn’t make business sense. So what’s the alternative smart blog writer?

Here’s a suggestion. Embed your exit needs into your commercial strategy at least 2 years before you think this may happen. Don’t wait until you have to hire a specialist M&A company at the request of your investors.

Another exit home truth is that you want to be in as strong a negotiating position when the day beckons, and ideally have at least 2 interested acquirers. Not exactly rocket-science, but often overlooked. Let’s look at ways to achieve this goal.

Firstly you need time. Improving your negotiating strength will take direction, focus and discipline, but none of this can be achieved if you leave it too late. Next, you need to estimate who would be potential acquirers, and why would they want to buy you. Within most industries, with the exception of individual investors, there are a limited number of companies big enough, and motivated enough to acquire another. In fact, when we scratched our heads, we ended up with only 6 reasons, such as removing an annoying competitor, or to complement product and services more quickly than through organic growth. When you ask the right questions, it becomes fairly clear. So having identified potential acquirers, and established their possible motivations, what can you do?

Let’s demonstrate this with a hypothetical scenario. You think a larger competitor may acquire you to prevent their main competitor from doing so. Your commercial strategy could therefore be to play one off against the other, or to start collaborating with one in order to increase the hunger of the former. This is strategy pure and simple. What can I do to make Co A want to buy me even more?

There is clearly a direct correlation with commercial opportunities. Where would you collaborate with Co B?. Do you want to take away some key market Share from Co A and become even more irritating. Whatever your plan there will be a direct impact on the types of opportunities you pursue and where they are.

Strategies are not generally for public (or even internal) consumption for obvious reasons, but these considerations can be translated into words that the team can understand. Embedding your exit strategy into your commercial strategy means that when the time come for the E word, your company is in a strong negotiating position having adapted business and offerings to enhance your strength.

To make this exercise easier we have built the Mbrace Acquisition Attractiveness as part of our consulting services. Contact us for more information.