An Exit Strategy for the Rest of Us

An Exit Strategy for the Rest of Us, by Mike Jones, Managing Director with Onyx Associates mikejones@onyxassociates.com.

We’ve all heard the mouth-watering stories of the entrepreneurial dream. A fledgling startup gets acquired by a large tech company for an astounding sum of money. Yahoo acquires Flickr for a rumored $30 to $35 million. Ebay acquires Skype for $2.6 billion.

If you are an entrepreneur or executive with a burning ambition to sell your company and become a legend, by all means, go for it.

But let’s face it, such largesse is not available to everyone. Home run hitters will need a hot technology that stands to make orders-of-magnitude advancements over the status quo. The potential market for your solution needs to be enormous and growing. Customers will gladly purchase your product frequently and repeatedly. Even with all of that, the odds are stacked against achieving a dream buy out deal. And IPO’s certainly aren’t for everyone.

So what about the rest of us? There are loads of solid technology companies with marketable products that solve genuine problems, and (gasp) make good money doing so!

If your company falls into this category, I offer some sage advice for preparing for the eventual sale of your company.

A wise deal maker once told me, “The best thing a business owner can do to prepare to sell a company is continue to run the business the best they can.” Strive to become a dominate force in your market. And don’t forget the fundamentals: Increase sales, manage expenses, and improve the customer experience.

Here are some examples for your M&A toolbox:

* Pursue moves that strengthen your core business. Eliminate unprofitable products or lines of business.
* Raise Prices (thoughtfully): Small increases in product price can result in large increases in business value.
* Reduce labor (thoughtfully): Take advantage of lower cost global resources when it makes sense.
* Manage your IP carefully: The last thing a buyer wants is to find out you are selling something you don’t own! Consider open source code - make sure you can document your rights and obligations.
* Eliminate unnecessary expenditures or over-generous benefits: Do you really need that Gulfstream?
* Take action to realize the value of unrelated businesses or under-utilized assets, before the sale! A buyer of your company won’t pay for them, but someone else might.
* Invest in management. Tie in key employees and provide performance incentives.
* Improve key business processes. Help your employees do their jobs better, faster and cheaper.
* Review accounting policies. Buyers, especially public companies, expect your books to be air tight.

Any surprises on this list? Hopefully not. But as any entrepreneur will tell you, the devil is in the details. And execution is easier said than done.

Want to discuss the topic of mergers and acquisitions in more detail? I invite you to contact me at mikejones@onyxassociates.com.

I also invite you to attend FountainBlue's Connections event, Successful Mergers & Acquisitions: What Does It Take? on Friday, July 21, from 11:30 a.m. - 1:30 p.m. at Fenwick & West LLP in Mountain View. I’ll be facilitating a panel of expert deal makers:

* Ken Gonzalez, VP Corporate Development, McAfee
* Andrew Luh, Partner, Mergers & Acquisitions Group, Fenwick & West
* Dave Petroni, Advisor to Valchemy, Inc., former VP Corporate Development, PeopleSoft
* Frank Young, Private Equity Investor and CEO, PsPrint.com

To register, visit http://www.acteva.com/booking.cfm?bevaid=104706.

Mike Jones is a Managing Director with Onyx Associates, a mergers and acquisitions services firm. You can visit the Onyx website at www.onyxassociates.com.

For more information about FountainBlue, visit http://www.FountainBlue.biz.