On December 28th, the Poised for Exit podcast hosted by Julie Keyes features Ed Gehres and strategy advice for the technology and IT services industries. Listen and subscribe to the podcast here and/or read on for a quick summary of the discussion.
Some of the key pieces of advice on the podcast included the following topics:
- Organic Growth Traps – Ed discussed how the speed of technology for software firms and the desire to please clients for services companies often results in developing products or services that don’t really further or directly serve a company’s core competency or strategic vision. When that happens, being able to identify those non-core applications, segregating them and then spinning them off or selling them to a strategic buyer or partner is a strategy every tech company needs to keep in mind.
- Acquisition Growth Traps – For companies that pursue growth through acquisition, Ed talked about how this often leads to accumulated baggage that can also weigh down a company’s trajectory toward it’s ultimate vision. Those ancillary products require development and support time and resources and, to the extent they do not build on the company’s core product they can quickly become costly distractions.
- Outside Capital Influence – Technology companies, more often than not, require some level of outside financing to get up and running, scale and continue to innovate. Whenever a company takes outside investment, however, that means those investors are keenly interested in the use of those funds and the direction of the company … including any mergers and acquisitions plans or strategies.
- Preserving a Core Team for “What’s Next” – Exit strategies are often considered to be “all or nothing” gambits. Companies are sold an an whole unit including all of the products, customers, partners and team members. But it doesn’t have to be that way and often, for a company that is looking to create the next big thing, preserving your core team to help launch that new development is a way to get up and running fast and strong and does not always result in a lower valuation for the assets you do sell off.
- “Goose and Golden Eggs” Strategy – Although the terminology is borrowed, the analogy is clear. The assets of a tech or an IT services company can often be segmented to preserve a core production engine (the Goose) while enabling you to sell off assets such as particular product lines or service lines (the “golden eggs”) to strategic buyers or partners who need or have already been using the exact product you want to sell and move away from. Keep the Goose so you can make new eggs. Sell the Eggs to the buyers who want and value them the most and reinvest the proceeds.
- Ongoing Strategy and Third Party Advisors – Knowing where you want to go and how to get there, whether by organic growth or acquisitions, is critical to a company’s overall strategy and direction. It isn’t always easy to stay on track, either. Technology moves fast. Having an outside advisor that can help keep your strategy fresh and directed on an ongoing basis is critical. And strategies shouldn’t be made once and consulted never. They need to be updated and reviewed on a regular cadence. Because the needs of the business can make it hard to maintain that discipline, this is one more reason why an outside strategic advisor is so important.
Navvee can provide the strategic advisory services that can help a tech or IT services company achieve growth and success. And for those businesses that believe they are at the point where they want to acquire or merge or exit out to another company, then True North Mergers and Acquisitions, a strategic partner to Navvee, can provide the expertise and resources needed to be successful. Contact us today to learn more and get the assistance you need for your business.
