Google recently acquired Aardvark, a social media company that lets users tap into the knowledge and experience of their extended network of contacts to get quick answers to specific questions. Let’s say you’re in New York and get a kink in your neck. You could post a question to Aardvark that will ask your friends and friends of friends for a recommendation on a good chiropractor in Manhattan.
Google paid $50 Million for Aardvark.
Aardvark is a good case study on building a company to be sold. They didn’t try to compete with Facebook for all forms of social media. Instead, Aardvark specialized in getting obscure questions answered by trusted contacts. Google is in a Coke vs. Pepsi- battle with Facebook for dominance of the social media category, so it made sense to look at Aardvark as an acquisition. Could Google have built the same technology? You bet. Could it have acquired Aardvark for less money and time than it would have taken Google to build it from the ground up? Yes again. Aardvark therefore gets acquired.
We all know that becoming the world’s best at something can help you win business; becoming famous for one thing can also help you sell your company.
Strategic buyers are looking to pick up something new they don’t have and couldn’t easily create on their own. Before doing a lot of due diligence, strategic buyers ask three basic questions:
- How much would it cost us to build from scratch?
- How long would it take?
- How much could we buy that company for?
If you offer a hodgepodge of products and services the strategic buyer sells too, it will argue that it would be easier to just build what you’ve created and drop its price below yours or hire a couple of salespeople to go after your customers.
However, if you offer something truly special that is difficult to replicate, the acquirer will want to buy your business instead of wasting the time and money to build it from the ground up.
Becoming a specialist in one thing will not only help you in your marketing; it will also help you get acquired for a premium when you’re ready to exit.
Curious about whether you could sell your business (and for how much)? Take the 10-question Sellability Index Quiz.
Editor’s Note: this article was previously published at OPENForum.com under the title: “The 3 Questions Acquirers Will Ask Before They Buy Your Company” It is reprinted here with permission.
And lest people go out and try to build companies for acquisition, I would remind them that the most desirable company for acquisition is the company that would be just fine on their own. You don’t want to date the girl that’s marriage-hungry, you want to date the girl who’s intelligent and comfortable with who she is.