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Waves of Consolidation – The CEO’s Most Important Job – Part 4

by Basil Peters on April 18, 2012 · 2 comments

This video explains why I believe that not missing the “Wave of Consolidation” may the successful CEO’s most important job.

How Exits Have Changed in 2012 -
Presented at the National Angel Capital Association Summit -
March 8, 2012 in Austin, Texas -

Highlights of Part 4:

  • The most devastating reason that companies fail to exit
  • A relatively new phenomena driven by the amount of cash available, number of buyers and the internet
  • The buyers are smart too and how they start the beginnings of the wave
  • When you can see the wave, it’s almost always too late
  • What happens after the wave – killing the small companies
  • My saddest job – explaining why an unsolicited offer is almost never good news
  • How we can all be better angel investors – support the ACA and ARI

This is the Powerpoint for “How Exits Have Changed in 2012“.

The video for part 1 of How Exits Have Changed is here.

{ 2 comments… read them below or add one }

gamach August 27, 2012 at 11:37 pm

Hi Basil,

I’m an entrepreneur on my second media startup. I had a question for you: How do you think the exit strategy changes when the exit relies on a strategic buyer to fully monetize the startup rather than the startup being capable of monetizing on it’s own?

Ill provide a bit more detail…The startup is a media website in a coveted segment of the parenting market. We have the potential of generating millions of pageviews within this segment. Monetization would be based on banner advertising, affiliate revenue for baby products, etc. Although its straightforward to build that subscriber base, it would be difficult to build significant scale to sell all the advertising inventory. Even with 3rd party ad networks, the CPM’s would be low and wouldn’t result in much revenue.

However, there are many potential exit opportunities that would find this traffic valuable. This would include large media networks that engage parents throughout the lifecycle of child rearing, as well as large baby retailers. They do have the proper scale and capability to fill the inventory at much higher CPM’s, or through ecommerce sales. Companies of this scale could immediately monetize the entire website.

How do you think targeting these strategic buyers would affect our planning? Do you think we’ll see a desired outcome creating valuations based on inventory monetization as opposed to an EBITDA multiple?

Thanks so much,

GA

Reply

Basil Peters September 20, 2012 at 5:51 am

GA – you are absolutely correct. In most exits, one of the most effective ways to maximize value is by “illuminating strategic value.” You have done a good job of describing one type of strategic value in your question. This post describes the basics of the process: http://www.exits.com/blog/illuminating-strategic-value-when-you-sell-a-business/.

And yes, your type of business will often sell more on the traffic metrics than the financial statements.

Good luck with your business and your exit.

Reply

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