Articles

Sep 1, 2020

Steve King on NorthStar’s Private Equity Fast Pitch® podcast

Listen to Steve King discuss Alaris’ strategy and our partnerships, gain valuable insight on the challenges......

Oct 1, 2020

Have Businesses Become Commodities?

In a world that has come to a place of comfort with the notion of change even if it is just for the sake of change,......

Have Businesses Become Commodities?

Oct 1, 2020

In a world that has come to a place of comfort with the notion of change even if it is just for the sake of change, is there a chance in the realm of business ownership that we may be leaving something on the table?  Businesses are kin to organisms in the sense that they are always adapting to changing environments by using their ability to embrace the unforeseen, adapt to it and evolve.  The ability to create a culture of innovation has obviously been an important key to weathering and thriving through these changes but something that seems to often be overlooked is the existence of ownership groups with real world experience through decades of ownership that can be easily referenced, unbiasedly evaluated and put into meaningful context in order to create a plan of action.  This is the primary benefit of establishing a continuity of strong leadership.  

In a time not too long ago, there was a strong sense of passion and pride in the pursuit of a “Legacy Business.”  Whether that be for an owner’s family, their employees or their community, it was evident that establishing and sustaining that legacy was at the core or their long-term visions and strategy.  Fast forward to today’s world of rapid change combined with the evolution of Private Equity, and you will see a dramatic flip of the script on the notion of a legacy business.  At the heart of private equity lays an inherent necessity to buy with the intent to sell. Now the notion that a business should be bought without even an afterthought of a sale at some point in the future is an overstatement.  But to buy with the intent to sell by definition cannot create a path for the long-term continuity of strong leadership.

This model for all of its value creation and optimization over the years has created a world where an owner’s business has become a commodity.  A commodity that once it has entered the hands of private equity, will be passed along to the next private equity business who will in turn pass it along to the next and so on and so forth.  As an owner, you will be asked to re-invest alongside the new owner in an effort to align interests.  But in many unfortunate situations, this typically means that you will have to re-invest to become the spokesperson in order to relay along the new private equity partner’s message.  In many cases, it has proven to provide an injection of new energy and innovation but after the initial honeymoon phase reaches a conclusion, it becomes about optimizing and rightsizing.  We all know that means job cuts and reallocation of responsibilities.  The idea of legacy and pursuit is to create a sustainable environment for your people to learn, grow and become the next leaders begins to diminish.

It’s not to say that in this ever-changing world we live in today that the choice to sell your business to a private equity buyer is the wrong choice.  For many, it is the right choice and can come with significant financial benefit.  But for those out there who still believe in the notion of creating a Legacy Business that can truly withstand the test of time and change, sometimes the best option to pursue that path is one that will not only satisfy your financial goals but prevent your business from becoming a commodity.  That path is to cultivate and position a core group of next generation leaders from within your business.  This in turn will create both a sophisticate and competitive buyer who will ensure that the legacy of your business continues and the long-term continuity of strong leadership remains in tact.

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