Change of Ownership

Change of Ownership

Aspects of change of ownership

  • So what should you do?
  • What if you make a bad decision?
  • How do you decide what route to take?
  • How do you safely transition into the future?
  • Does this mean that literally millions of SME's are going to find themselves without succession and buyers?

New Management

Finding the right individual to run your business after you leave can be very tricky. What you often find is someone, who has gone through growing a business, telling you that they like to do that again for you. You want to believe them because they have a proven track record, but if they have any ambition, they do not want to do the same thing again, they should have bigger ambitions.

Hiring someone externally invariably leads to cultural clashes and other problems, but hiring someone internally often poses more problems. It is nearly impossible to train an employee to think like a founder.

Portfolio Approach

Even “successful” entrepreneurs, pulling out healthy dividends from their business each year, have often not much financial net worth left, if you take away their company and house. Or worse, they had their liquidity moment when they cashed out from one business and then ended up pouring all that money back into their new venture. The rags to riches and back to rags again story is a cliché for a reason.

Brand Retention

Often an investor will buy a business that’s got a great reputation, great clients, and has been doing really well. Then they rebrand it to their own name, and/or centralize the management, thus killing the Golden Goose. It’s no wonder that a M&A has a high failure rate.

Talent Retention

When companies merge changes happen. People don’t like that. The new owners may throw money at key personnel and senior people, overlooking the steady workers who are critical for the success of any merger. Your competitors realize that this is the best chance they have to lure key workers away, whilst you’re busy doing the deal.

Synergies and Centralization

Most merging companies massively overestimate the cost-saving opportunities of the synergies. After spending all the money and energy chasing every synergistically removable dollar, they are disappointed when the cost savings do not outweigh the cost of hiring/training new staff to replace all the great ones who left due to the turmoil.

Global Expansion

Despite a shrinking world with more similarities than differences between nations, there are still huge cultural differences that have to be learned, at great expense, until you understand how to make your product or service work in the new market.

Conclusion

It is quite a series of challenges entrepreneurs will have to work through, if they want to grow, or exit their business and retire, or move up the rungs on the entrepreneurial ladder.

Agglomeration is the missing piece in the puzzle. It takes the best from each growth and each exit scenario, and works well for both investors and entrepreneurs. The perfect Win-Win:

 The best way to describe it:

It is a collaborative, a group of smaller companies from the same and/or different fragmented industries joining forces, and then grow further by inviting similar smaller companies and smaller, smart private equity investors to join them.

If all shareholder partners agree, an IPO might be an option, but only after certain efficiency improvements and available synergies have been successfully implemented, and the "dominant group of public market players" has no intent to ruin your group.

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