Tips to avoid getting stuck behind a price cut.
Minimizing Exit Price Haircuts
Optimizing Your Exit Strategy in the Energy Software Market
The method by which you chose to exit your business (energy SaaS company) can be as fraught with process design issues as any operational process. Exiting your business should be considered an operational concern, not an ad hoc event. The following is a real-life scenario:
A Case Study in Non-Strategic Exit Planning
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A software company decided to put itself up for sale, looking for interest from both the private equity and strategic buyer markets. For a myriad of reasons, the attempt to draw in strategics failed; however, activity was substantial in the private equity market. The bidding process seemed promising at first; the first round bids were attractive and the second round bids were higher than the first round bids. Despite announcing a record bookings quarter, however, the third round of bids dipped below the second round's offers. This came as a surprise; this outcome wasn't a reflection of the company's value, but rather the pitfalls of not treating an eventual exit as an operational concern.
Understanding the Dynamics of Auction Models
The bidders in this process were well-versed in auction bidding tactics which, by design, often lead to lower final offers. They know that based on the law of large numbers, they are going to win eventually using this strategy. They know there is not perfect alignment among investors and greed might take over. But there is a way around all of this.
Don't let years of hard work building your software company evaporate in an unplanned give back of value at the finish line (i.e., don't let your efforts in building a robust sales engine and a successful energy software platform diminish at the final stage). MOIC helps software companies (especially those in the energy industry) get control of their own liquidity path — the most important thing is to start on day one.
MOIC specializes in guiding energy SaaS companies in establishing controlled, effective liquidity paths from day one. If this is of interest to you, contact us.
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