Mind to Market

Wednesday, January 31, 2007

The Art of Acquisition

The Colorado BioScience Association presented their monthly BioBreakfast this morning covering the trials and rewards of selling your company. The panel consisted of Bonnie Vivian, former CEO of Denver Biomedical, Harry Ross, former CEO of RxKinetix and Bill Freytag, former CEO of Myogen, all of whom had been involved with selling their respective companies within the last year. Each situation was unique; two of the companies had been private and one public, two were revenue generating and one was in the R&D stage, one was a medical device company and two were pharmaceuticals. They also all had different reasons for being acquired although maximizing investor value was the general theme. Dr. Ross, who admitted to having the least pleasant experience of the three, suggested three conditions that will greatly enhance the sale value of the company:

1. Revenue generation
2. Cash in the bank
3. Multiple suitors

These conditions will not only increase the company's value but increase the options open to the selling company; in fact even the option to sell or not sell. All three panelists agreed with these points.

Dr. Freytag also added that a prospective seller would be wise to expose all of their company's warts up front and not wait for prospective buyers to find them, which they eventually will. "Concealing the warts will only breed distrust between buyer and seller leading to more contentious negotiations." Dr. Ross agreed but added that prospective buyers may find warts the seller wasn't even aware of, or worse, didn't exist at all.

Each one of these CEO's has certainly written and explained their exit strategies to investors many times over, particularly Ms. Vivian and Dr. Ross. Did they ever imagine that those few paragraphs would come to pass in the experiences they recently went through? I would guess that the next time they enter those words in a future business plan they may give it more than a passing thought.

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