3 strategies that can help get your company acquired in a recession

  • Brian Fox is the president and founding father of Confirmation, a monetary knowledge affirmation company that was acquired for an undisclosed quantity by Thomson Reuters final summer season.
  • His company overcame two financial downturns since its inception, the Great Recession and the dot-com burst.
  • Fox presents sage recommendation for entrepreneurs considering promoting their companies throughout these making an attempt instances.
  • According to Fox, conserving money, constructing an unbreakable group, and discovering nice mentors are three key strategies to place your company for a profitable acquisition in a recession. 
  • Visit Business Insider’s homepage for extra tales.

The COVID-19 pandemic has wreaked havoc on the US economic system. At the start of June, the National Bureau of Economic Research formally declared that the nation is in a recession, whereas firms have been compelled to put off thousands and thousands of employees whilst states reopens.

Getting your company acquired in a contracting economic system could appear farfetched, but it surely’s not unimaginable, in response to Brian Fox, president and founding father of Confirmation, a monetary knowledge affirmation company. 

Though the company now operates in over 170 international locations, with over 16,000 accounting corporations and 5,000 banks utilizing its instruments, it had a humble starting in Fox’s grandmother’s storage. An digital affirmation service that offers the community to confirm belongings like revenues, money, receivables, and liabilities when firms undergo a monetary audit, Confirmation needed to overcome two financial downturns because it grew — the dot-com burst and downturn following 9/11 and the 2008 Great Recession.

The company was constructed on a promise that its founder vowed to hold by way of.

“My first year of business school [in 1999], I took an entrepreneurship class and shared the business plan with my dad,” Fox mentioned. “When he unexpectedly died in a hiking accident at the end of that year, my mom, brother and I used his life insurance policy as the seed capital for Confirmation.”  

With the supply of the cash in thoughts, Fox mentioned he felt nice stress to make Confirmation thrive.

“Right after I founded the business the dot-com bust happened, and then a year later 9/11 happened and the entire global economy crashed. I was a 26-year-old CEO of a dot-com, pre-revenue business,” Fox mentioned. “Knowing that I was using the money he left us to start my business, I was determined to either succeed 100% or to fail 100%, and there was no quitting or giving up when times got really hard.”

Fox and his group at Confirmation persevered and now have spent 10 straight years on the the Inc. 5000. The Brentwood, Tennessee-based company mentioned it posted almost $37 million in income in 2019, processed trillions of dollars in monetary knowledge, and has caught billions of dollars of monetary fraud. 

Confirmation was in the center of a progress spurt and had gone by way of a spherical of personal fairness financing when the group was approached about an acquisition.

“[A]t that point we hired William Blair, the investment bank, to help us because we were getting a lot of inquiries from folks who were interested in acquiring our business, even though we hadn’t intended to put it on the market at that point in time,” he mentioned.

Last summer season, the enterprise was acquired for an undisclosed quantity by Thomson Reuters.

Although Fox’s acquisition story reads a bit like a fairy story, Chester Spatt, professor of finance at Carnegie Mellon University’s Tepper School of Business, mentioned that companies ought to take coronary heart: Even in the COVID-19 and post-COVID-19 economic system, the way forward for mergers and acquisitions may very well be fairly constructive.

“In light of the magnitude of the current shocks and the long-run potential transformations of various activities and services, the positive case for M&A seems much stronger than in a traditional recession or downturn,” Spratt informed Business Insider. “The opportunity to exploit different synergies — including shoring up apparent weaknesses — for the new normal is huge.”

Fox’s journey with Confirmation offers an instance of the tenaciousness wanted to steer a company by way of the tough seas of recessions and downturns, and he gave Business Insider a few tips about positioning a company for acquisition amidst this chaotic economic system. 

Cash is king

According to Fox, crucial acquisition-positioning technique entrepreneurs can undertake is ensuring their stability sheet is firmly in the black. 

“Having the ability to determine your own future because you’re cashflow positive is fantastic,” Fox mentioned. “Do whatever you have to do to ensure you have enough cash on hand. Obviously, you want to push off expenses, you want to potentially work with your business partners to see if there are terms they can provide you, maybe longer payment terms — anything you can do to extend your runway.”

Fox mentioned he believes the COVID-19 downturn will final for 18 to 24 months, and inspired using outside-the-box pondering to beef up the underside line whereas weathering harsh financial circumstances. 

“We ultimately issued more stock options in lieu of cash payments in order to conserve our cash,” he mentioned. “We traded services so that both we and our partners could conserve our cash. Those were just a few techniques that helped us to see it through those difficult downturns in the economy.”

Your group is a main asset

Any entrepreneur positioning their company for acquisition ought to retrench in each instructions on their organizational chart, Fox mentioned, for 2 causes: One, your group is your best asset in working by way of robust circumstances, and two, a harmonious group that works collectively properly is a robust promoting level to events on the surface. 

Fox famous that when Confirmation was experiencing exponential progress, particularly abroad, the company employed key gamers in a number of high positions, together with bringing on a CFO for the primary time and selling a trusted long-time worker to the place of chief product officer.  

“When we went through both the private equity funding round and then our sale just two years later, having a seasoned and accomplished executive team that was hitting on all cylinders and driving our growth was a critical component that allowed us to achieve the valuation multiples we wanted,” Fox mentioned.

While Fox undoubtedly cashed in when Confirmation was acquired by Thomson Reuters, he mentioned probably the most significant a part of the deal for him was the group round him on the time.

“When I ended up selling Confirmation to Thomson Reuters, certainly it was a great opportunity for all the investors, but to me, the most personally rewarding component was the fact that the four of us who were in my grandmother’s garage when we started the business were there 20 years later when we sold the business,” he mentioned. “That’s something you just don’t see a whole lot, and I think speaks volumes about the team we created.”  

Find a mentor

“The last and maybe most important piece of advice I’d provide to entrepreneurs is to find a great mentor,” Fox mentioned. “My business partner Chris [Schellhorn], who had been the CEO of several successful businesses, coached and mentored me and made me into a much better leader. He kept me sane in the crazy times and was the person who guided me most in my decision making.”

Being an entrepreneur can be a very lonely course of, so having a number of core help folks to show to is critically essential — particularly at milestones while you’re contemplating important modifications, like acquisition, that could characterize progress but additionally full upheaval.

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