Business owner may have sealed his fate by failing to act on buyout query
By Richard Hellan, for SBT
I want to tell you a story about Mr. Stars, Mr. Red, Miss White and Mr. Blue. Like that proviso at the beginning of the old television series about the L.A.P.D., "The story is true. Only the names and some facts have been changed to protect the innocent."
Six months ago, I spoke with a small business owner, Mr. Stars. Within a 10-day period, he had been approached independently by three of his competitors. Each expressed an interest in selling their respective businesses to him.
The nation’s continuing economic malaise was taking a heavy toll on each of their companies. Mr. Red was looking for a way to bail out of the industry altogether by cashing out. Miss White was looking for a way to enter new and larger markets by combining strengths and reducing overhead. And Mr. Blue, the last owner who approached him, was simply looking for a way to hang it up and salvage a job in the process.
Shooting from the hip, Mr. Stars gave to each owner a "thanks, but no thanks" reaction. His firm was doing reasonably well, despite the economy, and it seemed clear to him that at least two of the three persons approaching him were already driving their firms into "Elimination Alley."
By doing nothing at all, he imagined that his firm soon would benefit from their demise. And with respect to Miss White, the thought of taking on the expense of merger activity to enter new markets in an industry that was already soft had little appeal to Mr. Stars, at first glance.
Two weeks ago, I spoke with Mr. Stars again. I inquired about his decisions regarding the owners who had approached him. Did he still feel he had made wise decisions to forego any exploration of the inquirer’s interests? Were the competitors still around? What happened to the principals?
He proceeded to tell me a story that was interesting, indeed.
Several weeks after he was approached by the three business owners, he received a call from one of his largest customers, The Big Co., who inquired about any interest Mr. Stars might have in selling his firm to The Big Co.
The Big Co.’s first goal was to capture savings by creating an in-house department to provide the products and services it had been purchasing from Mr. Star’s firm and others. Its second goal was to turn the new department into an independent profit center with a mission to enter larger markets throughout the country where it has a strong presence and brand recognition.
Mr. Blue had approached The Big Co. with the idea of helping it develop an in-house department, which he would head-up for them, and he introduced Mr. Red and Miss White to The Big Co.
So, now all three competitors of Mr. Stars were in discussion with The Big Co. about selling their firms to it.
Mr. Stars is now pondering the future of his firm in the struggling economy, as he won’t be able to compete with his largest customer, who is on the verge of launching a competing business in-house by acquiring his competitors.
Mr. Stars had missed an opportunity.
In today’s economy, joint venture, merger and acquisition activities offer tremendous opportunities for growth, profitability and strategic positioning. However, they also require "out-of-the-box" thinking and a willingness to explore and discover hidden opportunities.
A highly competitive, free market economy does not allow for much complacency nor for leadership comfortable with "maintenance." And it is critical that the small-business owner looks at his or her company without blinders and with an open, creative mind.
Even the best of presented opportunities require solid "due diligence," as well as the advice of independent, seasoned advisors. Successful change initiatives involving joint ventures, mergers, acquisitions and divestitures require an array of legal, financial, operational and human resource issues. Having ready access to a team of seasoned advisors who can offer expertise and successful experience will help the business owner see things from different perspectives to minimize risk and leverage opportunities.
A solid strategic business plan can help to keep principals directed toward their overall mission, eliminating wasteful expenditures of time and money from adventuring on roads better left not traveled.
But challenging times can call for accommodating strange bedfellows. Opportunities that would not be presented in a stronger economy are presented in times like we have today. The same is true with respect to one’s competitors.
For the small-business owner, the playing field always remains essentially the same. It’s a tough job to consistently compete at a high level and achieve a decent, long-term return on investment.
The business owner or leader who takes prudent, calculated risks and makes more right decisions than wrong decisions is the one who succeeds. In a soft economy, strategic alliance, acquisition and merger activities become increasingly important for business owners to explore to achieve growth, profitability and the realization of dreams.
Mr. Stars still has a variety of ways to achieve his corporate mission and his personal dreams. His road to success may have been made more challenging because he saw the situations presented to him by his competitors as wine glasses "half- empty" and with problems, vs. "half- full" with opportunities.
Richard Hellan is president of Hellan Associates, an executive and business coaching firm headquartered in Milwaukee. He can be reached at 414-967-9012.
May 30, 2003 Small Business Times, Milwaukee