Partnerships are meant to accelerate growth and improve the prospects of your business.
Company acquisitions can benefit both parties, but care must be taken when considering the possibility. Depending on their size and priorities, acquiring companies may have different strategic imperatives. And companies that are being acquired should weigh the value of such partnerships, depending on their own success or lack thereof. We'll address the three criteria to consider when partnering at the close of the piece.
Those of us who spend time planning and executing technology-company acquisitions tend to heed the advice that we should always run a company as if were going to own it forever; otherwise, we will wind up owning it forever. Theres a great deal of wisdom and experience behind this advice, as the success of a company and its business model depends on its ability to profitably deliver long-term value in the market.
But there are many circumstances under which companies are bought and sold, including financial conditions, investor dynamics and major market developments. And as always, qualitative elements such as familiarity and likability also come into play. All of these factors collectively influence timing, process, terms and, ultimately, the price a willing buyer is willing to transact.
Theres a significant difference between what one would consider a successful sale of a company and one that isnt. Interestingly, deliberate consideration of a potential M&A exit that supports (but does not drive) a companys strategic and operational decisions can actually help accelerate its success as an independent entity and provide it the exposure to improve its acquisition prospects over the longer term.
Demonstrating success in the market place is probably the most important determinant of a companys attractiveness as an acquisition target. Of course, not every business that develops into a successful company is acquired. Some companies, obviously, achieve tremendous success independently, ultimately providing their investors liquidity through an IPO.
Although the actual statistics vary around the percentage of small companies that grow and continue to operate, as well as the percentage of those that IPO, the numbers tell us that these success scenarios are in the extreme minority. So for a company to continue its business and operational legacy or to provide its investors with liquidity, it will likely have to be acquired.
About the author
Elias Mendoza, Managing Director of Investment Development and Strategy
Mr. Mendoza joined Siris Capital in 2013. Mr. Mendoza's responsibilities at Siris include identifying and evaluating trends within existing and potential industry verticals for investment opportunities, and assisting our Executive Partners in evaluating underlying business strategies of targeted companies and existing portfolio companies. Prior to joining Siris, Mr. Mendoza was a Partner at Union Square Advisors, where he served as its Chief Operating Officer and a senior banker across the firm's verticals. Through July 2011, Mr. Mendoza held various senior positions at IBM, including Vice President and Global Head of Corporate Development. In such capacity, he was responsible for identifying , executing and integrating all acquisitions, investments and divestitures for the company on a worldwide basis. Mr. Mendoza's previous experience includes over twelve years spent at Morgan Stanley & Co., most recently as an Executive Director in the Investment Banking Division. Mr. Mendoza received a Landegger Program Certificate in International Business Diplomacy and an MBA from Georgetown University. He received his AB from Princeton University.