Sell to venture capitalists or multinational? | Business owners told to move slowly and expect plenty of scrutiny
No matter what innovative product or service got a company noticed, the multinational that ends up buying it is most keen about acquiring a softer asset.
“It’s the people. That’s what you want,” says Garth Hodges, Bayer CropScience’s global head of business development and licensing.
He told the Agri Innovation Forum, which was held in Winnipeg Nov. 19-20, that keeping the most important staff within the company is extremely important when a large company like Bayer buys a firm that operates in “a whole new sector, like biologics or like seeds or like biotech.”
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The dream of many entrepreneurs is for their small, start-up company to boldly forge into a new area of the agriculture economy and then be bought by a big company for big dollars.
Many people attending the Agri Innovation Forum were hawking their start-ups to a roomful of venture capitalists, looking for a few million dollars to get their company a few steps forward.
However, Hodges’ address focused on how small companies could best make the second part of the dream come true.
The boom in agriculture production and the high recent value of crops have prompted investors to look for a way to get into the burgeoning sector.
Many venture capital companies are doing so by taking positions in small companies and helping push them forward.
However, Hodges cautioned entrepreneurs that big companies such as Bayer are not likely to want to buy pieces of small companies and become a minority shareholder, the way it sometimes has operated in the past. Bayer is too big and its processes too cumbersome to fit well with tiny, fast-growing companies.
“We’re just not good at it,” said Hodges.
“We just can’t give you that kind of service that a real (venture capital company) can give you. It’s not our expertise, it’s not our focus, so better leave it to the experts.”
However, purchasing most or all of a promising company is something multinationals are likely to do, especially if it gets them into a new area in which they know little.
It’s why they don’t want to see the core staff leave once the acquisition is done, because it’s the employees’ vision, abilities and expertise that might be acquisition’s most valuable asset.
Hodges urged entrepreneurs to think of their staff when attempting to entice a multinational and to prepare them for life after the sale.
He also warned them to expect a lot of scrutiny in any deal with a multinational and to try not to rush the process.
Global companies go through every aspect of the operations of any company they are considering buying, and that won’t be abandoned because somebody wants to sell their company quick.
“If you don’t give us enough time or enough information, sorry, we may just have to say no and pass up on that opportunity,” said Hodges.
