29 Apr 5 “strategic” ways to sell your company
There can be many strategic reasons why a bigger company might want to buy yours. Here are a few to consider:
1. To control their supply chain
In 2011, Starbucks announced it had acquired Evolution Fresh, one of their providers of juice drinks, for $30 million. Now Starbucks is no longer beholden to one of its suppliers.
2. To give their sales people something else in their briefcase
Also in 2011, AOL announced the acquisition of The Huffington Post for $315 million, even though HuffPo had just turned its first modest profit on paper. AOL wanted to give its advertising sales people more inventory to sell and HuffPo had 26 million unique visitors a month.
3. To make their cash cow product look sexier
Microsoft bought Skype for $8.5 billion dollars even though Skype was losing money. The good folks in Redmond must have assumed they could sell more Windows, Office and Xbox by integrating Skype into everything they already sell.
4. To enter a new geographic market
Herman Miller paid $50 million to acquire China’s POSH Office Systems in order to get a beachhead into the world’s fastest growing market for office furniture.
5. To get a hold of your employees
Facebook reportedly acquired Internet start-up Hot Potato for $10 million, largely to get hold of the talented developers working at the company.
Most acquisitions are done for rational reasons where a buyer agrees to pay today for the rights to your future stream of cash. You may, however, be able to get a significant premium for your company if you know how much your business is worth in someone else’s hands.