Situation: A founder CEO is faced with two options – either selling his company or buying a complimentary company. The acquisition would fulfill his dream as CEO, but he is concerned both about the synergy between the two entities and his ability to manage the combined company. Should he sell, or buy the other company?
Advice from the CEOs:
- Given these concerns approach the purchase opportunity skeptically. Be more prepared to say no than yes.
- In evaluating his ability to run a
larger operation, the CEO should objectively assess his own abilities.
- A good CEO is not a Superman. A good CEO creates a viable business model and vision and hires a good team to bring that model to reality.
- Consider past accomplishments. In an industry where nobody makes money the CEO has created a business model that is sustainable, highly profitable, and technically superior. The only thing lacking is size in terms of revenue.
- The new opportunity – on the right terms – can launch the company from dominance in a niche to dominance in a significantly larger industry.
- Assess the new opportunity both as a
technical and cultural match. If there is a good cultural match:
- Fewer things must go right to add value.
- The purchase provides a channel to a larger market.
- The acquisition will rapidly speed company growth.
- The biggest concern will be the time to manage both entities.
- The most important factor will be the chemistry between the two company teams. If the chemistry is good, the combination offers reasonable assurance that the two teams will complement each other.
- Look at the purchase as an opportunity to build a win-win with enduring value.
- In considering outside investors to support the acquisition, be cautious about financial partners and the conditions behind each financing option.