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May 2012

Marrying the Elephant – The First Date Part 1

Starting a relationship with the elephant - when you have the long term intention to be acquired – is different than if you don’t have aspirations of being acquired. 

Elephant employee’s often have the luxury of making acquisition decisions based on who they want to work with – it’s not just about ROI. Not thinking future acquisition?  You can be pushy, demanding, manipulative, and even threatening at times.  Want to be acquired?  It’s okay to be pushy and demanding – but with a smile and a win-win approach.  It only takes one person in a position if influence to think you are not someone they want to work with – or that has doubts about if you can be trusted – and thoughts of acquisition are out the door – for years to come.  Over the years, I have seen a number of Autodesk partners with great technology – that would have made great high ROI and high growth acquisitions – not happen because the owner or a senior manager alienated a key Autodesk decision maker or two.  When you consider the long term value of the marriage to the elephant – five years later when most marriages really start “producing” – is all about the people, there is good reason to not pursue acquisition of companies with senior management you do not respect and trust.

 It’s frequently not clear who within the elephant’s organization will be the champion of the marriage (the “matchmaker”) and who are the parents and godfather that you will need blessings from for the marriage to move forward.  This means you will have not just one “first date” but a string of first dates. 

Who will you need to take out on a first date? 

It depends on the nature of your apps and technologies. 

If what you offer is a “feature” of an existing product the elephant has on the market, an incremental improvement, you’ll want to get dates with the Product Manager, and Product Line Manager.  As well as have an occasional cup of coffee with the head of the Product Division (likely someone with VP in their title) who is likely quick to encourage or discourage courtship.  Having a difficult time getting their attention?  Sometimes a senior sales manager working for the elephant can act as a matchmaker – pointing out large sales opportunities or losses that you could help them with.

Do you have what the elephant would see as a “whole new product”?  Don’t be too quick to say “yes”, as frequently small companies build businesses on products that appear to be “complete solutions” – but that the elephant would view as just a new feature set for an existing product.  If you really believe what you have is a new product, you need to get that first date with the Product Line Manager as well as the head of the Product Division.  You also want to get some awareness with a more senior person yet - - such as an Exec VP and/or the President – as they’ll likely be part of the review process for a significant acquisition and have “veto” ability.

Are you in a related but quite different business then the elephant is engaged in today?  Do you really really think there is a strong compelling reason for the elephant to enter into this new business?  Is it really going to provide the elephant a strong LARGE long term growth opportunity or competitive advantage?  Again think hard about these questions, as many people are too quick to say “yes” when from the elephant’s perspective it’s often unclear, or downright unlikely.  If yes, it’s time to take the President and possibly an Exec VP of the elephant out for a cup of coffee to introduce them to the concept.  It’s rare you are going to get a mid-level manager to champion an acquisition outside their area of expertise – and rarer yet they will succeed.

All this talk of who to meet.  How do I get meetings with all these people?  In my next post.

Marrying the Elephant – Preparing for the First Date

Are you ready to be asked out?

Can you convince the elephant you are a way for them to quickly reach their goals – quicker than their building it themselves? 

Can you make a convincing case you can save them a few “lost years” developing rev 1 and then rev 2 – before they have a competitive rev 3 product?  Can you make the case acquiring you is a way to leapfrog internal development and their competition? 

Can you clearly state why your technology is better than your competitors? 

You can be assured the elephant will do both a make versus buy analysis – as well as consider what your competitors have to offer.

Are you pretty (or handsome)? 

Take a step back at look at the technology, team and company you are building and consider any “warts” you might have – from the elephant’s point of view.  It’s hard to take a step back and view your company – your baby – objectively from the elephant’s perspective – but you need to do it or you seriously risk getting blind-sided by the elephant having a point of you don’t understand and puts your company at risk.  Many companies get “professional help” evaluating their position as an acquisition candidate.

It’s time for a bit of corporate introspection and psychoanalysis.

Psychologist jokeDo you have products that elephant doesn’t value because they have similar products?  Overlapping products will best case lead to your placing a higher value on your company because of the products and sales of overlapping products – overlapping products the elephant may place little to no value in (not strategically important as they have a solution already.  Worst case an elephant may avoid talking to you about an acquisition at all because acquiring a company with overlapping product lines could lead to an expensive (for the elephant)  investigation by government entities that regulate competition (such as the Federal Trade Commission in the US and the European Commission on Competition in the EU).  Want to look attractive to the elephant? Minimize overlapping product capabilities.  And do it before you get the elephant thinking acquisition as they might find your competitors product offering more to their liking.

Do you have contractual problems (from the elephant’s perspective)?  Elephants have lawyers and financial teams that will make sure you are beautiful without your make-up on.  They’ll take a hard look at your company looking at third party technology licenses, royalties you pay, patents you hold, sales agreements you have, company ownership and more.  The legal and financial reviews are not about proving you should be acquired – but about looking for legal and financial reasons you shouldn’t be acquired.  If you have legal or financial complexities, you need to get them cleaned up before engaging the elephant in a courtship dance – or again you risk getting the elephant interested – but their finding one of your competitors more attractive.

Do you have great technology and people?  As mentioned before, elephants buy small fast growing companies because of their technology and people.  Will you look better than your competition under the harsh glare of stage lights?  What might you do to look better than your competitors when the dance starts (as mentioned above, product line alignment, legal and financial “cleanliness” will help).  Interestingly the elephant may financially justify the acquisition in some part on your products and revenue stream – but reality is within a year or two of an acquisition – it’s all too often just base technology and people that maintain value.

Marrying the Elephant - Getting in Shape

 Before you take the first step to “get noticed” by the elephants (or several elephants) – you need to “get in shape” or you risk getting the elephant interested in a marriage – but with someone else that is more attractive then you are.  Take a step back and consider what the elephant wants most – what the elephant values most.  And you need to consider this at several levels as elephants are big organizations with different people working for the elephant having different motivations.  Assuming you are a “start-up” – a small company that is pursuing rapid growth by riding an elephant,  you likely have just two primary values to an elephant – industry and technology expertise.  It’s likely the elephant see’s little value in your marketing or sales organizations – as they have their own order of magnitude larger marketing and sales organizations.  Your value is helping them get to market fast with competitive technology and with a management team that knows the ins and outs of the market.Lifting weights

Depending on your technology, the elephant may see you as a way to add a new set of features to an existing offering, extending their product or services line or as an entree into a new market they want to enter sooner or later. So sit back and consider what the elephant would view your company as providing them – which will also let you know who to talk to on the elephant’s staff.  Is your offering a new feature set for an existing product the elephant has been selling for years?  If so, you need to start talking to a Product Manager first.  Your technology is a product line extension – a new product the elephant can sell to their existing customers?  You need to be talking to a Product Line Manager or a VP that manages the elephant’s investments in the industry your product would be attractive to.  Is your offering related to the elephant’s current products – but in a new (for the elephant) industry?  You likely need to catch the interest of an Executive VP, President or CEO.

Are you ready to be asked out on your first date?

Before you make that call and ask the right person on the elephant’s staff for a meeting or out to lunch, are you ready to have that discussion?  More about “preparing for your first date” in my next blog post.

Marrying the Elephant – Introduction

Have you thought about marrying the elephant? What it would take for the elephant to acquire your business or some of your apps?Marriage Holding Hands

The next several blog posting will take a step by step look at how one can pursue marrying the elephant – which you’ll find very much like really get married – making one’s self attractive to the elephant, getting noticed, the role of parents and match makers, getting to the proposal, how to avoid getting left standing at the altar alone, and steps that will make for a successful marriage. 

First – most marriages (mergers) don’t happen by accident.  Most happen because the acquiree takes specific steps to court the acquirer (the elephant).  So if you are thinking getting married “would be nice” – but are not taking specific steps to make it happen – don’t be surprised if nothing happens.  The elephant has lots of beautiful people courting him – and you are just one in a large crowd.

Also think about what the likely best timing of a marriage is.  You might be building a business in a niche market=r that the elephant may never look for a bride in.  Or you may be in a market that elephant is likely to want enter sooner rather than later – so you are in a race to marry the elephant before the elephant starts the courting process on their own – and starts playing the field with all your competitors.

Next blog post will be about how to get your company in shape – making you attractive to the elephant – more attractive than the other girls (or guys) also playing the field.