Thursday, March 12, 2015

Strategic Value

Every week it seems we hear about some large-scale merger or acquisition. Lately it's the internet and software giants Google, Microsoft, Facebook, Yahoo snatching up other companies.

Recently I ran across a company for sale but the owners didn't want the competitors to know they were for sale. Why not? You'll get more money for your business from a competitor because you have strategic value: either capacity, capability, distinctive technology, customer relations...or best of all agile business systems/procedures/processes operated by an aligned, empowered and engaged team. The owners didn't really say why they didn't approach the competitors except that it would make their customers nervous.

Turns out the competitors already deal with those same customers and have 15-20x as much business with them as this company. The only legitimate nervousness would be that the competitors would go after the last sliver of business the owners thought they had sequestered for themselves. The owners probably have also surmised that their company doesn't have any capacity, capability, etc. that the competitors need or want. Interestingly, the competitors have been in business a shorter time than this company but have grown faster. The owners just didn't really work at it, I guess.

These owners need to find a buyer who can create a competitive advantage...or a buyer who just wants to throw away some money.

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