A competitor is often the likely buyer for your business. It may even be worth more in their hands. However, the challenge is if the deal falls through, you may end up regretting all the secrets you shared in the process. John Bodrozic, the co-founder of Meridian Systems began negotiations with a direct competitor and ended up living to regret it.
A direct competitor can often be the most likely buyer for your business. A competitor already knows your industry and may see your company as a way to consolidate market share and gain more pricing control. They may also be able to buy your business and eliminate redundancies in your back office, meaning your business is worth more in their hands than in those of many other potential buyers.
The challenge with negotiating the sale of your business to a competitor is, if the deal falls through, you can end up regretting all the secrets you shared with them in the process.
John Bodrozic is the co-founder of Meridian Systems, which offered project management software to the construction industry. In 2005, Bodrozic began negotiations with a direct competitor and ended up living to regret it.
If you’re keen to see how attractive your company would be to a competitor, get your Value Builder Score and we’ll rate your business according to the eight factors buyers care about most.
About John Bodrozic
John Bodrozic is a co-founder of HomeZada, a digital home-management platform that empowers homeowners to manage all aspects of their home, which for most is their largest asset. Bodrozic was previously the co-founder of Meridian Systems, the leading project management software solution in the construction industry. He helped guide the business through start-up, raising venture funding, growing the business to a global scale, and then selling to a public company called Trimble (NASDAQ: TRMB). Bodrozic received his degree in Mechanical Engineering from the University of Notre Dame.
The Competitive Threat: How to Handle an Acquisition Offer From a Competitor.
Some Highlights Of The Show
Business: Meridian Systems
4:30: “I used to work in [the industry] … I was frustrated with the lack of software and technology to do the job and I ran into a co-founder who was a civil engineer but his passion was software development. We approached each other one day and said we should build a software to manage these projects.”
5:23: “50/50 from the get go … we basically bootstrapped the company … getting into credit card debt and relying on family and friends from a daily lifestyle perspective.”
6:30: “After we released our first and second versions we managed to land some big customers and then grew the business in the early years based on cash flow and profitability.”
7:49: “At the time of the VC round, it was probably around $6 million or $7 million in revenue … We were probably ranging between 1% to 5% in profit … As young entrepreneurs we were investing a lot back into the business.”
9:07: The early dot-com years and facing a lot more competitors.
10:37: “We did get an early offer to buy the business … I think the offer was about $9 million.”
12:11: “We ended up raising a $13 million round … It was a pretty interesting deal structure.”
12:25: The deal structure explained.
13:55: “We were definitely on a more aggressive growth path … We made a lot of investments … and had more financial discipline and rigour on how we reported our numbers through more formalized board meetings.”
15:37: "We had this culture in the company of avid self-learners – hire people smarter than you.”
19:00: “They decided to put some money into the business [to take it to a global scale].”
19:12: Talking additional funding when you have existing financing and investors.”
22:00: “They are looking for a return on their investment: more often than not, more liquidity for venture firms ends up being through acquisition.”
22:30: “We were always on the look-out for who could be potential acquirers for this business. It was a combination of us putting us in a position to have strategic partnerships with potential acquirers … Correspondingly, there were other big companies in the industry who were on the M&A buy-side.”
24:45: Learn the difference between selling your business to a competitive or complimentary acquirer.
25:20: “If there is not a successful deal, you are worried about how much the other company knows about you.”
26:03: 5 tips for flushing out serious acquirers during the due diligence process.
28:00: Break-up fees explained.
34:50: “I don’t think there was much animosity [among the team] … they knew what the business objectives were and we had this open-book policy.”
36:18: “It was a mid-eight-figure deal.”
39:50: “We had to re-build the confidence factor of the employee base [after the deal fell through].”
41:17: The valuation at 8X to 10X EBITA.
44:00: “For me the liquidity event was not the end of the journey … for me it was an event along the journey which is why I stayed for four years after [the sale].”
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For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com or my personal website at www.BuySellFLbiz.com.
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