The Pros and Cons to Being Acquired as a Startup

Startups are always difficult, but with the right determination and hard work they can flourish into top companies. However, along the way other well-established companies might become interested in your business idea and may even offer to acquire your company. A case in scenario is the acquisition of Blue Coat by Bain Capital. Bain Capital had seen the potential of this company and that largely influenced the decision to acquire it. This is usually a difficult or confusing decision to make due to the many things one has to consider before either agreeing to the deal or rejecting it. Below are some of the pros and cons of being acquired that could also help an individual to reach a well-informed conclusion.

Pros

1 – Liquidity

When a startup business is acquired by a more established business or organization, the company acquired enjoys liquidity as well as adds value. This is due to the elimination of redundancies and overhead operation costs that the business used to bear in the past and which are now been taken care of by the parent company. The addition of value is partly due to the acquired business taking advantage of the well established distribution channels to leverage more of its services and products to a wider market. When a startup business is acquired it is able to experience a deeper market penetration due to the already laid out groundwork and marketing strategies of the parent company.

2 – Exposure

When your company is acquired by a bigger company, the acquired company (together with its employees) stand to be exposed to many new networks and influential people. The kind of exposure one will get is just immeasurable as you will find that most doors one considered locked will open with ease and thus open a new chapter on how you perceive things. The acquisition will lead to the creation of more networks which would mean more business.

Cons

1 – Control

When a company gets acquired, the founder of such a company will relinquish the powers of their own company into the hands of the parent company. Your startup business will no longer be yours and hence crucial decision making processes will no longer fall under your docket anymore. That means the execution model of the company you owned before will be taken up by the bigger company, thus leaving you with no control whatsoever as far as running the affairs of a company you nurtured since it was a day old.

2 – Expectation Mismatch

It goes without saying that the expectations of the acquirer will be very different from those of the acquired company. The acquired company’s owner had a dream of achieving certain objectives and had drawn its plan to achieve this feat. However, when the acquisition deal closes, it is then that the owner of the acquired company realizes that the plans of the acquirer are very different and opposite. This is a recipe for disaster as there will be some form of tension between the two parties and this could lead to friction. It is important to understand that some big companies acquire the startups in their industry in order to shore up the position they hold in the company or at times block competition. This is a clear example that the parent company cares less about your company thriving or not and this is the cause of the many fights witnessed between the acquirer and the acquired company.

3 – Vision

It is very hard to find that the parent company’s vision for the startup business goes in a perfect alignment. It is hard to find perfect ligament between these two companies as the acquired company no longer follows the ambition of the other and vice versa. The effect of this is general slowness in as far as efficiency is concerned and this could affect business due to the friction created.