A Software Entrepreneur’s Perspective on Private Equity
November 18 2020
Contributed By: Chris Martin, Co-Founder, Tibersoft & Managing Director, Food Tech Group
Deciding which acquirer to sell your company to can be an emotionally taxing experience. There are numerous Private Equity, Venture Capital, and Strategic buyers out there, and each will offer a different acquisition experience and outcome.
While exploring my options, I met with several potential acquirers, including Volaris Group and several Private Equity firms. Meeting with various buyers helped me understand the differences between different types of acquirers and make an informed decision.
Here’s a summary of the thought process while I considered selling my company to a Private Equity firm.
The Decision to Sell
By 2017 the decision to sell was made to gain investment to accelerate R&D and strengthen our customer focus. Tibersoft had been helping foodservice operators like Kellogg’s and PepsiCo manage their go-to-market processes for over 20 years. I wanted to make sure we remained at the forefront of the industry for many years to come. The company’s legacy was at stake, and my greatest fear was selling to a firm that didn’t share my long-term vision.
My Meeting with a PE Firm
I was led to the meeting room and greeted by a partner at the fund. The conversation quickly spun into an interesting – but vague – dialog about my company’s future possibilities. The firm was interested in Tibersoft, and they could see it fitting in well with their current portfolio. We talked of synergies and growth capital. I was satisfied with their plan at first, but then we got into the deal’s specifics.
I asked questions. “Where do you see the portfolio heading in the next 5 or 10 years?” “Do your companies ever take on debt?” “What will happen to my company when the fund reaches the end of its lifespan?” There was a noticeable vagueness to the firm’s answers, and they just couldn’t seem to say much at all with certainty.
After the Meeting: Processing my Thoughts
I knew that PE funds typically followed a 5-year ownership cycle of acquisition, growth, optimization, and re-sale. Since the fund was nearing the end of life, I had concerns that the ownership cycle would be accelerated. What if there wasn’t enough time for the company to realize its potential within the fund? Would we be re-sold only to be dissolved or amalgamated into some other business? In that scenario, what would happen to all those that have chosen to follow me? This was when my confidence in PE began to unravel.
Reality Sinks In
Weighing my options, I constantly felt the survival part of my brain was under a heavy load. After allowing a few weeks for my thoughts to sink in, the realities of Private Equity ownership fully expressed themselves. I decided I couldn’t sell the company to a firm that would flip it if we didn’t meet their planned ROI.
Choosing Volaris Group
I had initially met with two of Volaris’ business leaders, Jim Baker and Rob Clay, earlier in my exploratory process before the meeting with the PE firm. Though I was intrigued by Volaris’ approach to preserving autonomy and holding companies forever, I needed time to appreciate the importance of these values.
Revisiting my conversations with Jim and Rob, I felt my heart and mind were aligned on the same decision: We would go with Volaris. I had bonded with Jim and Rob over our common interests in assuring a strong and stable future for Tibersoft. In fact, we were in such strong alignment with our thoughts that we even completed each other’s sentences from time to time. At the end of the day, I concluded that Volaris could offer the highest standards of integrity while supporting me as I led the company to new heights.
Now that I’ve been a part of Volaris for three years, I can look back on that day at the PE firm and confidently say I made the right decision. My team is expanding, exciting initiatives are being deployed, and the company is experiencing double-digit growth.