Driving to the Exit

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Selling your business means knowing why someone would want to acquire it

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The dream of many entrepreneurs as well as their employees and investors is building a business to a point where it can be sold. We have all read the stories and seen the movies, which portray the college dropout with a brilliant idea who retires to the Caribbean when Google purchases his business a few short years later. Sure, it happens. But the fact is that successfully selling a company is more often the result of a confluence of an incredible amount of hard work, great timing, a strong strategy and even some good old-fashioned luck.

So if this is an aspirational goal, how does one achieve this exciting “exit” event?

As a founder or executive hoping to sell your company, you need to understand the marketplace you operate in. For example, are there larger well-capitalized businesses in your market? If so, are these companies acquisitive? If the answer to both of these questions is yes then it is time to look at the reasons companies acquire. Acquisitions can be driven by a number of factors but generally fall into one of the following categories: defensive maneuvers, asset purchases, acquisition of talent or expansion strategies.

 

  • Defensive maneuvers occur when a business realizes you are a competitive threat (or could become one), so they purchase your business to remove potential competition and better position themselves in the market.
  • Asset purchases are transactions where the buyer is interested in a specific set of technologies, products, services or offerings that they hope to add to their own offerings.
  • Acquisitions of talent occur when you or your team become valuable and important to a buyer who wants you on their side of the table.
  • Expansion strategies are often driven by geography, new lines of business, customers or other opportunities to increase the depth, reach and offerings of the buyer’s business.

 

These are only a few examples, but knowing what drives acquisitions means a company can develop specific strategies to strengthen the areas of a business that potential acquirers value.

To develop and ultimately demonstrate value to acquirers, it is important to remember the things they care about (and pay a premium for) so that you can create demonstrable value in those areas. For example, if a business based in New Jersey is interested in geographic expansion into the state of South Carolina, and you can provide signed contracts with South Carolina-based customers, have an office in South Carolina and have deep knowledge of local decision-makers, your business becomes a potential path for this New Jersey-based business to expand into South Carolina.

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At Venture South we invest in early-stage companies that we believe have the potential to be acquired or file for a public offering in the future. These exit events create returns for our investors and are a key component of our mission and vision. Therefore, when we meet with companies that have a clear understanding of not only the importance but also the process which can help drive a business to an exit, we are more likely to invest and support the business.

This is an important topic for many companies, founders, executives, investors and funds – so VentureSouth is offering an exclusive workshop on Executing Exits as part of our inaugural VentureSouth Summit taking place on Nov. 30 and Dec. 1 in Greenville.

The workshop, a program of the Angel Resource Institute, will provide attendees with the knowledge and resources to maximize the probability of completing a successful exit, ensuring the price is fair, the terms are reasonable and the outcome is optimal for the team and the business. We are fortunate that Bill Payne, a nationally renowned angel investing expert, will join us to lead the workshop.

While the majority of the summit is closed, the Exits workshop is open to the public. You can learn more and find registration details at venturesouth.vc/thesummit. We hope to see you there and wish you happy exits.

Workshop: Executing Exits

Nov. 30
8:30 a.m.-noon
Hyatt Regency Greenville, 220 N. Main St.
venturesouth.vc/thesummit

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