250 MILLION REASONS WHY YOU NEED TO SELL TO A STRATEGIC BUYER

Microsoft has reportedly paid $250 million to buy British apps firm, Swiftkey.

Selling your business to a strategic buyer guarantees that you maximize your exit and hit the jackpot even if your last accounts show an $8 million operating loss!

I will explain the key lessons for business owners shortly.

The business was founded in 2008 by 3 Cambridge graduates – Jon Reynolds, Ben Medlock and Chris Hill-Scott.

Soon after the business started, Chris resigned apparently due to excessive hours and no salary….I’m sure that sounds familiar to most, if not all, business owners like ourselves!

The UK press have made a great play on Chris’ potential ‘loss of millions’.

The other 2 forged ahead.

Swiftkey has developed predictive text technology. The software suggests the next word a user is about to type.

The app works in more than 100 languages and has been downloaded in excess of 10 million times. It has also headed the download ratings in 47 countries.

Additionally, it appears automatically on 300 million smartphones and tablets after it completed deals with businesses like Samsung.

The key to the technology’s success is the use of Artificial Intelligence [AI] to improve the predictions over time by learning each user’s writing style. It even remembers nicknames and slang.

2 other important facts uniquely position this business:

  1. The company estimates its software has saved its users 10 trillion keystrokes which equates to more than 100,000 years of typing time.
  2. They have worked with Stephen Hawking and have enabled him to speak faster and continue to give lectures.

What lessons, as business owners, can you learn so you can maximize your exit?

Strategic buyers only represent about 5% of all business sales….that’s the bad news.

The good news is they pay ‘premium prices’….life changing for the owners. True financial freedom is achieved.

The owners, in this case, received $40 million each…..

Additionally, the good news continues as they buy businesses ‘for their own good reasons’ Often, to the outside world, it might not make any sense but they have a larger and broader picture.

In this case Microsoft bought Swiftkey, apparently, for the following reasons:

  1. It has openly stated that AI will be a significant trend in 2016.
  2. It has been buying other iphone and Android apps such as Wunderlist [the to do app], Sunrise [a calendar app] and Accompli [an email app that works with Outlook].
  3. Microsoft has recently been working on a version of its own keyboard called Word Flow for the iphone. However, the keyboard isn’t available to all iphone users so buying Swiftkey could replace the Word Flow project.

This is speculation. We don’t actually know their reasons.

There are some more important lessons we can learn if we want to maximize our exit:

  1. Strategic buyers ‘buy the team’. The team at Swiftkey is 150 strong.
  2. They pay cash. $250 million….sounds a big number to you and me but Microsoft has $85 billion in cash so it’s a drop in the ocean for them
  3. I’m sure the association with Stephen Hawking helped. Being associated with a ‘big’ personality doesn’t underpin value, but it does add value.
  4. The financial numbers are not critical.

Swiftkey’s numbers in 2014 were $13 million in revenue and they reported a loss of $8 million.

Yes….the staggering truth is that Microsoft have paid $250 million in cash for a business that has only $13 million in sales and last reported a $8 million operating loss!!

They have their own reasons.

So if you want to sell to a strategic buyer and maximize your exit, it is critical you get to understand the big boys and market leaders in your niche. Read their reports and accounts, monitor what they are doing….if possible talk to them.

You must assess and ask – what do you have or what can you create that will make them pay premium prices for your business?

The prize is worth the effort.

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