There were these two college kids who did some small IT projects in their spare time. Eventually they developed a piece of software in the process, a large company happened to need exactly that functionality and all of a sudden the two guys were running a little software business which has developed nicely. Sounds familiar? So does a potential part two of the story: The two guys, CEO and CTO now in their fast growing, profitable company, are successful businessmen. Maybe they have big egos or maybe they have grown in different directions and just dont get along with each other anymore. They start fighting about the smallest decision demoralized employees and a deteriorating business are the result.
To turn things around in such a situation, either all or some of the founders must make room for professional management from outside. That is the point when an M&A advisor enters the scene because this scenario often means the sale of the company or at least of parts of it. Looking back at Corums history with more than 200 successful transactions so far in a surprisingly large number of our projects, the real reason for the sale turned out to be some kind of conflict which had developed between the partners.
The advisors first role is to facilitate discussion in order to tailor an M&A project based on the situation of the company and shareholders goals. Key driving factors include the percentage of shares to be placed, the readiness of the key operating shareholders those who were not causing the trouble to continue in their roles for limited time, etc.
According to our experience, in the case of severe conflicts between the partners, the sale of the company has proven to be the best, and possibly only, way to move the company back on track.
Let me stress that partnerships dont necessarily develop that way. For example, even six years after they founded their company, the active shareholders for one of our clients still meet each Sunday afternoon to talk about business and life in general while having a couple of beers together.
A version of this article originally appeared in Soft•letter and Software Success.