Chapter 36There is No Shame Approaching Your Competitors

Perhaps the most gut-wrenching thing you could do when there are no offers but you still want to sell is to reach out to your most bitter competitor and seek for a potential consolidation. This should be the last resort, as engaging in a conversation with your competitor proactively would always put you in a spot where you have to share your metrics and some level of trade secrets that would benefit your competitor. Plus, they have no obligation to buy you even after you share all of these insights that normally they would have to pay top dollars for. Nevertheless, certain times the only way to find a M&A deal is to approach your rivals.

Swallow your pride and understand that businesses can be bought or can be sold, there is no shame in two competitors joining forces, in fact, such deals happen all the time and some of the most successful companies were the byproducts of competitors consolidating (Paypal and X, Pixar and Disney, United Airlines and Continental, Exxon and Mobil, Sirius and XM, etc). However, because this will have to be an outbound reach out, expect your competitor to be keen to extract all the information you have, and if in fact there was a segment or product that they like to absorb into their portfolio, expect the initial offer to be a lot worse than what you normally get for even an acquihire type of deal. In fact, you will most likely get an all stock deal if the competitor is also privately held.

Nevertheless, it is commendable to find a home for your employees, and if the prospect of your competitor is much better than yours, or that of the joint venture has better prospects, your privately held options or stocks would have a better chance of liquidating in the future. While it is always more satisfying to beat your competitor than to join forces, sometimes it is the best option to combine as you get to consolidate and streamline duplicate functions, pool talent together, and lift pricing power. So before you pull the chords and call off the M&A effort, ask yourself, have you talked to all your competitors, and would there be an one plus one equals more than two situation if you joined forces with a bitter rival.