How (not) to sell your business
We recently sold a majority stake in our business to a company with whom we have a very long association (+5 years). So how's it working out?
We sold our business because we needed to grow faster and needed the resources that the acquiring company can leverage (sales force, contacts and a client base ripe for cross selling opportunities). But 20 months later our majority shareholder has not grown our business by a single RAND (let alone DOLLAR).
Naturally we're not particularly happy. But, fundamentally, this is our own fault. So what did we do wrong?
Historically, through the years of our association, our majority shareholder hasn't helped us grow our business. Yes, there are one or two individuals who have been supportive. But the company as a whole has not made a growth contribution. Initially we thought that this was because they didn't want to add value to our business as an acquisition would then make us more expensive to buy. But, to be honest, they just haven't had the energy and determinism to make growth happen.
So why did we then sell? Or why didn't we take this pretty fundamental precedent on board?
Well new management came on board. Younger people. Who, actually, got a bit cross with us when we pointed out that the acquiring company had never grown our business. Their argument was that they were a new team and we shouldn't bring up this issue again.
So we didn't. And we sold.
And this is not successful.
So what are the lessons?
- We should have demanded a review of their growth strategy for our business. They promised to grow the business. But we should have made them fess up on their integration and growth strategy. Personally I don't think they had one.
- Don't be rushed. The business is yours not theirs. We were pressured into making a fundamental decision based on their time-lines. We should have ignored that pressure and insisted on them answering the "how" question.
- Trust your gut. One of the people leading the acquisition had indicated that they would not support the growth of the business if an acquisition wasn't on the table. This is basically unethical and should have raised a big red flag as to their culture and values (which were, obviously, misaligned with ours).
- Don't do it if the CEO is not actively engaged in the business and gets upset when challenged about the lack of growth (which was promised). And don't be calmed with a "I'm standing away because you guys are running the business". That's not the point, the Group CEO is supposed to drive the growth strategy. And not just let things slide.
- Have a good lawyer. Thankfully our super smart very experienced lawyer put in a "breach of sale" clause which basically said that if the acquiring company "by design or neglect" failed to grow the business, then we could call them out for this specific breach.
Finally, always remember what you are fighting for! This is your money, your retirement, your holiday, the education fund for your children (and grandchildren). Even your expected medical treatment.
Being nice and patient and not fighting is not going to get them to fulfill their commitment.