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Finance for Non-Financial Managers
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buying an established company, if it even could find an
established company willing to be acquired.
Acquisition: The Strategic Exit
Let’s suppose you’re the founder/CEO of a company that did-
n’t get angel funding, didn’t get VC funding, didn’t get strate-
gic partner funding, and still managed to build a company
that is making it on its own. The company is self-sufficient in
terms of cash flow and modestly profitable, but it just doesn’t
have enough resources to take full advantage of its market
position. Let’s further assume that your company’s not going
to be an IPO candidate because it’s just not exciting enough to
sizzle the pages of a prospectus. Finally, let’s suppose the
company was built on some innovative technology that’s like-
ly to be seriously challenged in a few years. This is a pretty
fair assumption, just because technology moves pretty fast
these days, particularly if a company has demonstrated
there’s a ready, profitable market for it.
Many founders will look at the prospect of running such a
company for five or 10 more years to just make an adequate
living and say, “No more!” Others will be ready to go the dis-
tance, but fearful of their chances against bigger, well-financed
competitors and worried that they might lose it all. Their
options? Fold the tent and go home, hang on and hope for the
best, or find a very big brother to protect the company from
intruders.
In financial circles, finding a big brother doesn’t mean going
to some charity event or calling long-lost relatives. It means
finding a large company that will acquire the young company
and perhaps be willing to pay off the owner/managers after
some transition period or offer them jobs running their company
from inside the newly acquired big brother.
Without a strategic partner, the management team must find
a prospective buyer and then convince that company that
acquiring it would be a good idea. They might do that by hiring