Most business owners don't think carefully enough about life post-acquisition. In some cases owners may not have adequate time to pick the right acquirer for the business which they have built. We've seen this happen before, and more often than not, choosing the wrong acquirer for your business can lead to unnecessary pain for yourself, your employees, and your customers. Here are the top 3 considerations all sellers should make before exiting their business:
1. Does the acquirer understand your business?
In many instances, great vertical market software companies are bought by acquirers who lack the domain expertise to successfully operate such a business. As Warren Buffet says, “investors need to stay within their Circle of Competence.”
If the new owner does not understand how to run a vertical market software business, they can quickly turn a great business into a mediocre one. This poses unpleasant consequences for the employees, customers, and longevity of the business. Without a deep understanding of both software and a specific niche industry, they will be chipping away at the foundation that you have built over the years.
2. How will your employees and customers be treated?
Just as no two businesses are the same, no two acquirers are the same either. Each acquirer has a unique set of motives and plans for the businesses that they acquire. For example, private equity funds or other financial acquirers will want to flip businesses they acquire inside of 5 years and will be focused purely on maximizing their gain. This is an unpleasant experience for employees, as it impacts the businesses’ ability to scale and destroys synergies within the company.
Customers may suffer as well. The acquirer may hold your customers “hostage” to extract the maximum out of them for a few years. This will help the business look better when they try to sell it on, but those customers will be dissatisfied and will look to leave as soon as they can.
3. How much independence and control will the acquirer take?
Instead of operating as one whole business where all departments work as a team, many acquirers will functionally integrate businesses into others they already own. In this scenario, the business is broken down into departments and operates in multiple silos.
If you’re an Owner Operator who hopes their company will remain intact after the sale, the integration process and strategy should be discussed with the acquirer up front.
Acquisitions at Volaris Group
Volaris Group works with sellers to plan the exit of their dreams. Whether the seller is looking for a multi-year transition, generational handover, or succession, we take the time to create a transition plan that agrees for both party’s objectives.
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