How to Avoid Getting Carved Up by an Acquirer

Streaming services like ESPN+, Disney Plus, and Netflix have risen to prominence in part because cable providers have been holding their customers hostage for decades.

If you wanted to get ESPN in the old days, you had to subscribe to a cable package of six hundred useless channels with nothing but bad sitcoms and crappy reruns.

Now that you can stream ESPN+, you can get your sports without the useless fluff.

It doesn’t matter whether they’re a sports fan, a movie buff, or an acquirer of a business; nobody likes being forced to buy what they don’t want. That’s why you may inadvertently undermine the value of your business by launching new products and services outside of your niche.

One of the immutable laws of acquiring a business is “Thou shalt not buy what thou do not need.” In other words, an acquirer will value the part of your business they cannot recreate easily. Rather than becoming a sprawling mishmash of products and services, if your goal is to sell your business one day, it’s best to stay focused on a small handful of tightly integrated offerings.

How NewSportMedia Got Carved Up

As an example of what can happen when you have two different businesses under one roof, let’s take a look at the story of NewSportMedia, which does technology consulting for sports leagues.

In addition to offering custom IT consulting and web hosting, Founder Cary Moretti also created a software application called LeagueStat. The app helped hockey leagues like the AHL and CHL provide fans, journalists, parents, and scouts with real-time statistics on their favorite teams.

NewSportMedia grew to 27 employees in part because the professional services side of Moretti’s business was people intensive. Seven of his people worked exclusively on LeagueStat.

In 2014 Moretti was approached by HockeyTech, a worldwide leader in providing hockey-related technologies, analytics, and information services. HockeyTech was founded in 2013 by Stu Siegel (technology entrepreneur and former Florida Panthers Managing Partner/CEO) with the mission of impacting the hockey world through new technologies and advanced analytics services.

Siegel liked LeagueStat but didn’t have much use for Moretti’s entire company. Instead of placing a value on NewSportMedia and its 27 employees, Siegel only wanted LeagueStat, so he offered to buy it if Moretti was willing to carve out the software application from the rest of his business.

Moretti agreed to carve out LeagueStat and considers his exit a success, but he also learned a valuable lesson: Acquirers only want to buy what they can use and are turned off by owners unwilling to uncouple what they have created if the parts don’t fit together seamlessly.

In your case, when you sell your business, you will want an acquirer to buy all of your company. Yet suppose you have wandered off into several unrelated or loosely complementary companies. In that case, you may face an uphill battle as acquirers—like the frustrated cable subscriber—fight the feeling of being forced to buy something they will not use.

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