The big news in the Maine startup ecosystem is the acquisition of Pika Energy by Generac, Inc.
As reported by Maine Startups Insider (Wisconsin Company Acquires Pika Energy), all Pika shareholders, including MVF, received a healthy return on their investment. In addition, the acquisition has placed Pika on excellent footing to greatly increase the sales, distribution and product innovations of their solar + battery storage energy solutions.
With the entire Pika team remaining in Westbrook, this is certainty a win-win-win-win for the company, its employees, its investors, and the Maine economy.
At the ceremonial last meeting of the Pika Board of Directors, Ben Polito, Pika’s co-founder and CEO humbly proclaimed: “We got lucky!” While certainly luck is an ingredient of any successful venture, perhaps a more accurate representation is that Pika put themselves in the right place at the right time. Ben and the Pika team made their own luck through diligent and proactive measures.
For those of you who are looking down the road and thinking about someday selling a business, here are a four “luck generating” activities that can set a company up for a fortuitous exit event.
1. Build a strong industry network. A broad and diverse group of contacts is a great asset that often pays unexpected dividends. Say “yes” to those industry meetings even if there is no immediate benefit. Regular connections with industry contacts, even without a specific purpose or sought outcome, helps business leaders remain close to the pulse of the market. This is even more important for innovation-based businesses as industry dynamics change frequently.
2. Know what matters to potential acquirers. Buyers who are seeking to acquire a strategic technology into their business are likely to pay the highest price. These seemingly “irrational” transactions are for reasons beyond just the dollars and cents (sense). If you have a pulse on your industry and your business is known this greatly increases your chances to take advantage of such opportunities. That doesn’t mean however, that financials don’t matter. It’s important to get a clear understanding of what financial metrics potential buyers are most interested in: sales, sales growth, customers, annual recurring revenue, churn, profitability? Each industry has a small handful of the most important metrics. Identify the most critical industry metrics, track them regularly, adjust accordingly, and continuously seek improvement.
3. Have your financials and organizational documents in order. In order to start a due diligence process with a potential buyer you will need such things as clean and clear financial records, corporate documents, board minutes, and board and shareholder resolutions. Corporate buyers often ask for THOUSANDS of documents from a potential acquisition target. Companies with good records and documentation will sail more easily through the diligence process and minimize any surprises that can affect the final purchase price or even kill the deal.
4. Be open to all possibilities. As the owner or leader of a dynamic company, you may be seeking capital, a new distribution partner, or co-manufacturer and find unexpected interest to be acquired. This is where a strong Board of Directors can really bring value to a management team. Regular and transparent communication between company management and the company’s board of directors or advisory board sets the stage for making the most important business decisions. Boards and advisors provide big picture advice at critical junctures only when they are up-to-date, engaged and aligned. It takes time, effort and vision to develop a highly functioning executive team and board. Investing in strong board governance over the life of the company can really pay dividends during a prospective exit opportunity.
There are certainly many more things that a business owner or management team can do to plan and move toward an eventual sale of the business. However, if you follow these four pillars, you’ll greatly increase the chance of being in the right place at the right time, and being ready to take full advantage when opportunities present themselves.