Once a company has decided to explore options for the best path forward, be it raising money, merging operations or an outright sale, it’s important to consider not only valuation, but also continuation – how will the company maintain operations and customers through to the closing and beyond? Here are the top three considerations from the MIT CFO Summit in years past:
It’s better to be bought than sold. Clearly it’s preferable to have buyers knocking at your door, than to have to ring doorbells and hope an interested party is receptive to your outreach. In other words, it’s best to have positioned the company in advance of embarking on an exploration of options. This means everything from competitive differentiation to media visibility to disciplined operations – do what you can to put the dynamics in your favor. Highly engaged customers are key as well.
Steady play in the meantime. CFOs routinely must make difficult decisions – is it time for a new location, new systems, new people… And it can be tempting to defer these decisions during a sale or merger exercise. Being on the market can be distracting and time consuming. Imagine your home on the market with an all-hours open house. But just as day-to-day activities and maintenance must continue while your home is listed for sale, so too does a company need to engage in “steady play” while your company is exploring its next stage. And it’s often the CFO who needs to keep a keen eye on the ongoing operations even while participating in meetings and negotiations about the future.
Timing is everything, and sometimes a very long thing. While some deals are announced and closed in record time, most take longer than expected. All the more reason to consider the up-front work that’s gone into positioning the company, as well as the commitment to compartmentalize the work of exploring future options from the demands of the ongoing business.
Once the next stage is completed, the attention that was given in the lead-up will continue to pay dividends in the form of a preferred partnership, smooth operations and the time that was needed to lay the proper path.