Planning Your Endgame Strategy

When Ann and I launched ClickZ, we had three potential scenarios for the endgame: 1) we stay private, building it out as well as we could over the long haul, 2) we pursue venture capital, hoping to position ourselves for a potential IPO, or 3) we develop the business into something that would make a great acquisition.

If you’ve followed the news lately, you already know that scenario three became a reality on September 8 when ClickZ was acquired by internet.com.

Many site publishers have the same endgame in mind but really don’t know how to go about the process. We went through the courting process with a number of companies before we tied the knot with internet.com. Ann and I joked about how we were like the “Runaway Bride,” as we had a tendency to bolt for the nearest exit the minute we began walking down the aisle with any number of suitors. What we learned over the last few years might be useful as you contemplate your own future.

Quite honestly, we could have gone in any number of directions as far as potential acquirers go. Why did we end up in bed with internet.com?

My core answer may not surprise you: There is a cleaner match in terms of current and potential audience with internet.com than with almost any other company we talked to. Given the B2B focus and given the number of sites oriented around marketing, advertising, commerce, site development, entrepreneurship, technology, etc. we had more room to reach a newer, wider audience with internet.com than we did with any of the other alternatives we considered.

Selling your company is a little like sending your kid off to school. You realize your own limitations as a parent and know that it’s in your child’s best interest for him or her to go outside the home to get an education. ClickZ needed to grow; we couldn’t provide growth with the environment and support it was going to need to thrive, so we made the best choice we could by putting our baby someplace where it could really take off.

Were ClickZ to be acquired by another B2B portal let’s say VerticalNet, for example I’d be concerned about potential synergies. Would the audiences for ElectricNet or Grocery Central have much interest in ClickZ’s online content, conferences, or publications?

I think not.

As we looked over the collection of sites and e-zines in the internet.com network, we found a number of audiences that would be QUITE interested in what we have to offer.

This is crucial because once you get beyond a certain level, it becomes very expensive to acquire new readers. So as you consider the question of acquisition, ask yourself who might be able to take your site beyond the level where it is now and do so at minimal cost. Synergy is low cost, by definition.

A second factor has to do with a core level of compatibility with the acquirer. We went through several rounds of talks with internet.com before we actually sealed the deal, so we got to know the players quite well. As I got to know Alan Meckler, I realized that we are philosophically on the same page when it comes to online publishing. While I might do a few things differently than Alan were I in his shoes, I’ve never met another individual who “gets it” the way he does.

While negotiating with other potential acquirers, I found myself having to educate the principals of these firms about the fundamentals of the business even some of the online companies we talked to. Not with Alan. He understood what we were doing and why. He appreciated the nuances others overlooked.

If you have to make a choice to live with someone for the long term which is what you are doing when you are acquired it’s best to find someone who “gets” your business and who you won’t need to be educating all the time. It makes for far better communications.

A third factor has to do with the acquirer’s track record with previous acquisitions. Does he or she take over operations, plunder, destroy, lay off, and rip the heart and soul out of a business? Or does he or she take a good thing and provide the necessary support to make it better?

Warren Buffett of Berkshire Hathaway has made billions by acquiring well-run companies, providing the background support they need, and staying the hell out of the way. Two acquisitions that I am very familiar with are Jordan’s Furniture and Nebraska Furniture Mart. Both were long-standing family-run organizations that dominated their market and did so quite well. In both cases, Buffett bought the companies, left the management and employees intact, and let them do their thing.

From the due diligence we did on internet.com, we found that it practices pretty much the same philosophy as we do. It doesn’t have the infrastructure or the interest in taking over the management of the site publishers it acquires. Probably 95 percent of the original owners are still managing their operations well after acquisition by internet.com. The ones we talked to all said the same thing: Not much has changed, but they’ve grown a lot and don’t have to hassle with the pain-in-the-butt details like ad management, sales, and technical details.

So we’re hoping to be able to say to you a year from now that all that is true.

We almost jumped at offers over the past few years that with the benefit of hindsight we would have deeply regretted. At the time, they sounded great because these companies offered more money than we ever thought we could make. But our intuition told us that something was wrong. Maybe it was the compatibility. Maybe it was the synergy. Maybe it was the people. Maybe there was a problem in their histories. Maybe it was several or all of the above.

We’re glad we waited. We think we found the right deal.

You may have some folks dangling dollars in front of you now, but are these people you want to live with, people you want to turn your baby over to? Does your gut feeling tell you to wait, that this may not be the right one? Listen to it. Wait until your intuition tells you it’s the right thing to do.

It won’t lead you wrong.

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