“Don’t lose sight of the upside” is the advice from one founder who recently sold his company to a competitor and explained that the sale process forces leaders to focus on what ifs and potential downsides.
In late 2015, Joel Cacciotti founded Hey Tom – a property management firm that leverages Airbnb and similar property-sharing services to boost financial returns for property owners. According to its website, the business was actually named after its first customer.
Almost three years in, and having grown to a team of 10, Mr Cacciotti and co-founder Luke Baker decided to join forces with competitor Hometime. But instead of a partnership arrangement, they instead opted for a full takeover of their business.
“I think that this is the type of industry that is going to continue to consolidate, and I think we were at a really good opportunity to choose who we wanted to position ourselves with,” Mr Cacciotti told My Business.
“Because Hometime have already kicked quite a few goals, it made sense to join forces rather than, as an alternative, raise capital and attack them head-on. It just seemed like the best option.”
M&As are never ‘easy’
Mr Cacciotti said that while the process “wasn’t arduous”, he suggested that the process involved in selling a business should never be underestimated as there is a level of complexity involved.
“It’s certainly never an easy process: I don’t think you could really describe any merger/acquisition as being easy, because you’ve got a lot of different moving parts and a lot of different stakeholders, different systems – quite a few different things that you’ve got to consider,” he said.
“But ultimately it was a really good learning experience for me personally – it was the second one that I’ve done but the first one that was of any really major significance.
“It took about six months or so – five months maybe. It definitely wasn’t arduous – like I said, one of the key drivers of this was the cultural and personal fit between the two management teams, which I think really made a big difference.”
He added that in the longer term, the Hey Tom brand will disappear as it becomes integrated into the Hometime business.
The takeover was also not without its hiccups – a “miscommunication” meant that the press statement announcing the acquisition was sent out without Mr Cacciotti or his team being made aware of the timing of the announcement.
Advice for navigating the sale process
Mr Cacciotti offered some words of wisdom based on his experience for other business leaders undergoing a sale or takeover process and suggested there are three key points every business leader should consider at the time.
1. Go with your gut
“I think with these types of things, there’s so many different ways that you can look at all the numbers and look at how everything works out, and that is certainly an important thing to consider,” he said.
“But at the end of the day, I think you really need to trust your instincts in these types of things, and that goes down to the people you’re dealing with, do you trust them, and just whether or not you have a good feeling about what you’re doing.
“Of course, there’s always going to be doubt, but I think if you’re feeling really bad about it, it’s definitely not something that you should be considering.”
2. Seek out those who have gone before you
“Definitely reach out to your network and get advice from friends or family or people that you know who have done a similar thing,” Mr Cacciotti explained.
“This is, I think, where it’s really important to have mentors and, often, you’ll be able to find people you know who have been through similar situations, and it’s important to lean on people at these times so you can get advice from people who have been there and done that.”
3. Your job is to look at the negatives, but don’t let this overwhelm you
“I think [it] is really important not to lose sight of the potential upside. When you’re going through these types of negotiations, especially with the legal side of things, if you’re thinking about trying to negotiate a legal contract, it can be quite daunting because you basically have to think about every single possibility where it could go wrong, and what the outcomes are if shit hits the fan.
“And so because you’re doing a lot of thinking around ‘what if this happens’ and ‘what if it fails’ and ‘what if it goes badly in this area’, it can become easy to lose sight of the potential upside.
“So it’s really important while you’re doing these types of negotiations to not lose sight of the potential upside when your job is to consider all of the downside.”
Transitioning from business owner to employee
Of course, many people venture into self-employment having already worked as an employee for someone else. But as in Mr Cacciotti’s case, merging a business with another can see leaders move in the opposite direction.
Asked if he was nervous about losing the level of control and autonomy that comes from heading up a business, Mr Cacciotti replied that he is actually upbeat about the freedom it will afford to him.
“I definitely enjoy being a business owner and all the challenges that poses, and I certainly like being multi-faceted in my role. But I am also quite excited and positive to have a little more focus in my role,” he said.
“One thing [about] working at Hey Tom was that there were quite a few projects that I wanted to head up which ultimately didn’t take off because I had so many things to focus on… whereas now in my role, I’ve got a bit more focus in what I want to do.
“I’ve traditionally also come from a sales background, so having more resources and a bigger sales team is going to allow me more focus to a singular part of the company and just focusing on the growth and driving that without worrying too much about the logistics and the minutiae that comes with running a business.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.