With the news that software giant Microsoft has acquired Yammer, there is plenty of chatter going around about acquisitions. Yammer is a social network for businesses that has been sold for over $1bn. Experts think that Microsoft will use the acquisition to position themselves as the software enterprise company of choice for small businesses and corporations around the world.
This leads to the perennial question that all founders ask themselves: do I want my company to be acquired? Take a look at the pros & cons below:
- Liquidity for investors and stakeholders: Employees of a company who have worked hard for a company to grow can receive their pay off with an acquisition because they can cash in their shares. Liquidity for investors is also important because if they risk their capital to help your company to grow, they deserve their exit. Investors can be institutional investors such as pension funds or individuals can go to consumer lenders. Liquidity is one of the most important reasons as to why companies such as Skype have agreed to be acquired.
- More resources: The company that is buying a start up has the resources to take care of it and it probably has a vision on how to nurture the company. In recent news, Facebook acquired Instagram for $1bn. Insiders think this acquisition went through because Facebook wants to tap into the wealth of knowledge that Instagram engineers have about mobile images. With plenty of cash in their reserves, Instagram will benefit from Facebook’s vast reservoir of experience which makes it a win-win situation for everyone.
- Lose control of the company: Founders will find it harder to make decisions for the company that came naturally because of the acquisition. This could include financial decisions such as choosing payday loans as a means of cash flow injection or picking new staff.