This article throws light upon the three main motives behind selling companies. The motives are: 1. Locating the Right Buyer 2. Secure Acceptable Terms of the Deal 3. Obtaining Satisfactory Autonomy.
Motive # 1. Locating the Right Buyer:
For entrepreneurs concerned about the company’s future, this task involves locating the correct buyer — one whose objectives regarding the acquired firm are quite compatible with those of the entrepreneur. This compatibility is more important in case of entrepreneurs who want to continue to head the company after the acquisition as a professional manager and not as an owner.
Motive # 2. Secure Acceptable Terms of the Deal:
While selling the company, the original owner’s focus is on such things as price for the company, payment and special conditions concerning the company’s employees and other aspects of the business.
The bargaining power of the entrepreneur depends largely, if not entirely, on the possession of valuable resources such as a very good record of financial performance, a strong reputation with customers and almost non-replaceable assets (such as management with exceptional ability or extraordinary talent and strong specialised research and development capabilities).
Motive # 3. Obtaining Satisfactory Autonomy:
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Entrepreneurs who stay with the acquired firm normally seek as much autonomy as possible in managing the company after its sale. For those who continue with the acquired company, managing the firm after the acquisition requires some major adjustments.
The entrepreneur has to tolerate less independence or loss of power. This is a difficult adjustment for an entrepreneur who was so long his own boss and the company was his own baby.
Whatever the status of the entrepreneur in the new set-up, he has still to report to a senior manager in the present company, provide ongoing, detailed reports of the business and account for its performance. Moreover, the entrepreneur’s salary may be reduced considerably as is done in case of re-employment of retired people.
Since most entrepreneurs face mental and psychological problems in making such adjustments they often quit within a few months or so. This has happened in case of many people in India’s corporate private sector of late.