Everyone has seen the television shows and movies where the police are closing in on the antihero who quickly grabs his go-bag filled with cash, weapons and fake identifications and eludes his captures just in time. While I hope that you don’t have a go-bag like those movie characters, your business should have a "go-bag" of sorts when it comes to being prepared for an early exit.
Every CEO and business owner dreams of the unsolicited offer from a larger company that is looking to buy them out. The mentality behind this is that someone else has noticed what your business is doing and sees value in acquiring it. In today’s market this offer might be more of a negative omen rather than the dream scenario most hope for.
The combination of technology and available funds has created a unique dynamic that has not ever been present before. Most large companies have resorted to acquisitions to spur growth. These large companies have access to an unprecedented amount of funds. They will not only buy a smaller company but they will infuse that company with a large amount of funds to maximize their market share. At the same time, the large companies are being run by very smart people. Not only are they able to stay informed of what markets their competitors are interested in but they are able to shop around for opportunities in that market also. This allows them to stay competitive and find the best acquisition partner. This creates a flurry of activity in the market and is generally when those unsolicited offers are made.
The reason why this becomes a negative is because like a large game of musical chairs, inevitably some businesses in that market are not going to be acquired. These businesses are in a very precarious position because their competition just received an infusion of growth capital which can be over twice as much as that competitor was purchased for. This will certainly impact revenue for the unacquired business that might have been very profitable previously. Even more damaging is the fact that banks and investors are savvy to the activity in the market and this will lead to a loss of available capital because those banks and investors do not want to compete with larger companies. Finally because the market has consolidated, the options for those unacquired businesses to exit are greatly reduced.
This is why it is vital to have your business’ “go-bag” prepared and ready. You as the CEO have to have your team, assets and business affairs prepared to quickly dive into the acquisition process. You are not going to have 2 years or even 12 months to get everything in line. The process is going to seem that much more expedited because that acquiring company wants to take control and get involved in the market as soon as possible (knowing that others are going to be trying to grab market share sooner rather than later also).
Waiting for that unsolicited offer to grab your business’ “go-bag” is like the spies in those movies waiting for the police to knock on their door before grabbing their go-bag. Once that event is happening it is often too late. Much like the spies in those movies, you need information that lets you know what is coming so you can get out in front of it. A CEO’s best asset is his or her connections that let them know it’s time to grab the “go-bag” and become proactive with launching the early exit process. Being a driver in the process is your number one asset in your “go-bag” because if the process is driving you then you are not getting the best value for your business.
The Business Law Group assists businesses with preparing their “go-bags” as well as keeping them connected and advised on potential market shifts. If you want to learn more about this process or how to maximize the value of your business, contact The Business Law Group today.
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