How do entrepreneurs and investors adjust their strategies in a sucking economy?
Private equity investors are looking at growing exit multiples and stay conservative. Equity investment is similar to mortgages. Put money into equity, raise debt and count on return as value grows. Equity investors invest into education sector, into products bought by colleges and universities all over the world, and other projects that are worldly. In smaller business services they are looking at strong internal expertise and experience staying afloat in any economic situation before they decide to invest.
Google corporate development believes they are in a good position with the current market situation. It is a buyers market.
Deal selection and due diligence hasn’t really changed for buyers. Attention should be paid to current contractual relationships and obligations – licensing agreements, support agreements, affiliations. Does Google want to go through an acquisition where they are get into a position to now be responsible for execution and fulfillment of the existing agreements, providing maintenance and customer service? Probably not.
Or, if a company’s current exit strategy is IPO – it is unlikely now.
It was certainly easier to set up an auction atmosphere when selling a company. Now, start-ups are expected to compromise. Acquisition process takes longer to close a transaction. With a lack of money, for some start ups things might be worse in terms of being at the end of their round A funding and now nobody is going to give them round B.
Entrepreneurs are expected to stay engaged as their request for funding is turned down.
All across, payroll suffers. Entrepreneurs should develop ad-hoc policies to reconsider employee compensation including stock and bonuses to conserve cash.
