InterimExecs founder Robert Jordan learned early the tremendous weight an entrepreneur must bear: “When you own the company, it’s nothing like being an employee,” he writes in exploring the sacred trust of ownership. “You might as well compare lifting up a hundred pound weight versus a feather.”
Jordan, who founded his first small business at age 26 and “hit every speed bump you could possibly think of, and then a couple more just for creativity points,” has learned a lot along the way. Among the most important lessons: while business exit planning is critical, it is usually neglected – at the owner’s and board’s peril.
He believes that an economic downtown is coming because, he says, the way “governments have been printing money” to fight the pandemic is “just not sustainable.” That means the cash small business owners need to survive could dry up quickly.
And that, in turn, will lead to wave of mergers and acquisitions, he believes, making it all that much more important for a company’s management team to add “crafting an exit strategy” to their business goals.
The great thing about playing the board game Monopoly as a kid was that you could buy up everything, collect rents all over the place (or get slaughtered if say your older sister was just a better player) but when the game ended, it was over.
We’re now living a real life monopoly game that’s crept up on even the strongest free markets.
After a call with a “strategy” director (I hate quotes, but let me do this just once) at a multibillion dollar public company, I couldn’t help but thank Forrest Gump for popularizing the proverb:
Stupid is as stupid does
This company is in a sleepy industry and to continue to grow they must find new ways to innovate. Our conversation circled around a request to help in what would be a major, breathtaking pivot into a completely new sector. To succeed, the company would need more leadership and more firepower than organic growth would provide, meaning they were looking to acquisitions. And we had the perfect target – a fit so good as to be called an epiphany.
Everyone has read studies proclaiming the majority of acquisitions fail to create shareholder value. Yet we are witnessing a roaring M&A market with very frothy valuations and no lack of buyers willing to venture into the game. Great for sellers. Timing is everything – private equity groups are finding rich exits to vintage deals entered into prior to the great recession that for years looked like they would be losers. These favorable returns are giving private equity investors even more reason to bring fresh capital to the table. Meanwhile, strategic buyers, armed with high valuations on their publicly traded shares and plenty of cash on hand have the wherewithal to bid aggressively, further driving up prices.
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