Forum Archive Index - February 2000

[Dylan James <dylan.james@nzef.org.nz>]

Phil, There may well be bad reasons for selling a business but equally 
I think there can be very good reasons for these deals and acquisitions. 
One potential reason is that often you might get a start up company that
reaches a point at which it cannot continue to grow without introducing
bureaucratic systems of control and management. Entrepreneurs are typically
not good at this, rather they are visionaries (passion etc.). So we often
see businesses that reach this point and are sold off to companies with the
systems to enable continued growth. 
Best example of this lately is Newcall buying Energy Options. Newcall have
the sales structure to sell the product nationwide overnight. Energy Options
might have taken years to grow that much. They retained the Energy staff to
continue managing the product but gave them access to the sales
infrastructure to expand sales. Critical for Newcall was ensuring the
product was up to their standard to save them a year in developing to that
point - as with Iprolink. Everybody wins as far as I can see. (Energy
Options directors having retained equity in an expanded company with
enhanced growth prospects) This is what I understand to be the synergies
that everybody seems to want. This has also occurred with Webmasters and
Glazier being bought by ADV. And also Extrados bought by Innovus. In all
these cases founders were retained as managers 
I'm sure there are many other good reasons also.
Whats life like at solution 6?
I'd say they play hackey sack at morning tea time.
 

Dylan 


-----Original Message-----
From: Phil Eriksen [mailto:phil@acepay.co.nz]
Sent: Monday, 7 February 2000 20:27
To: sharechat@sharechat.co.nz
Subject: Re: [sharechat] any clues on why Solution6 crashed 15% in
Australia today?


hugh webber wrote:
> 
> Can't see any immediate shattering news that would have caused it.
> Although they're totally unrelated as far as I know they appear to have
> dragged
> Sausage Software down about 3%.....one of the usual mysteries of human
> psychology I suppose.
> I think that like Fortune the Sharemarket must be a woman....

No, if it was a woman you wouldn't be able to chat on a forum about its
performance, and the only time we'd see any action is every second
Friday after it had drank a bottle of wine.. :)

As for Solution6, i haven't heard anything about *why* it crashed, but
the thing i've noticed is the sheer number of acquisitions they've
made.  One of the baffling aspects of the sharemarket is how almost any
acquisition seems to result in a share price increase.  While some
acquisitions create great value, I can't go past (a) nobody sells the
pot of gold at the end of the rainbow, so in almost all cases, the price
paid has to be higher than true worth, or the business must have
features that limit its future growth/hard-to-spot problems - if not,
why would you sell out?   

I saw a post on here recently that talked about the passion that
founders feel for their businesses, and the advantage of a founder
remaining involved.  I completely agree, and for someone to sell their
business, usually in return for shares, despite the passion and natural
affection they feel for their business surely suggests that the
acquiring company were generous.

The other thing that baffles me is how you can go on an acquisition
spree and successfully integrate all these businesses.  The word always
used with acquisitions is "synergy", but from personal experience, if
you employ a new staff member, and ask a current staff member to move to
another desk 10 metres away to create room, you quickly learn a lot
about synergy.  Now, if you acquire a 1000 employee business that is
involved in a similar business to your current one, the amount of chair
changing must be massive.  There must surely be fights for jobs,
insecurity about whether a job will still exist, and an incredible
amount of extra administration work.  Add in name changes, changes in
routine and procedure, possible conflicts of interest etc, and customers
can quickly get peeved off.

Im not against acquisitions - expansion must occur somehow, and
sometimes its cheaper to buy than create.  But when you look past the
share prices and bold statements, I really do wonder what life is like
at a company like Solution 6.  

Just my opinion, feel free to shoot me..

Cheers,
Phil

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