When writing this book, I was primarily thinking about the first generation of Polish entrepreneurs. To some extent, this is a continuation of my previous publication – Simply Business.
In the book, the capital market is presented from the point of view of an entrepreneur making numerous capital transactions, mainly on the private market. The contemporary capital market in Poland emerged by way of extremely accelerated evolution.
Political changes of 1989
The political breakthrough of 1989 launched a real ownership revolution. The most spectacular manifestation of ownership changes was the process of privatising state-owned enterprises, and the creation of the stock exchange together with the complete infrastructure of the public securities market.
At the same time, we saw the beginning of the expansion process of hundreds of thousands of private companies started from scratch or developing based on small trade, service or retail companies.
Selling a company
Chapter 1 outlines the problems related to the broadly understood topic of selling a business. Many times being a seller myself, I was often very hungry for knowledge about the sale process of a company. Irrespective of the fact that each transaction is different, there are many common points. It’s similar when travelling by car – each trip is different, there are different weather conditions, the traffic varies, perhaps we have a different car and are ourselves in a different mood. All this means that each time the same path ends up being a little different. However, there are always the same traffic rules that other users know and follow, and that increase the likelihood of reaching our destination safely and on time. The same is true when buying or selling a business.
Despite the differences in negotiations, there are many permanent elements of the game, the awareness of which will not only facilitate the entire process, but can constitute a significant competitive advantage. The chapter on selling a company addresses all the important stages that the entire process can be divided into, gives an idea of the timeline and the number of other business entities involved in the transaction. Without personal experience in acquisitions, most people don’t realise that the entire process can consist of even tens of crucial events that must occur in order for the company to change hands.
Using my own experience, I tried to describe everything through the eyes of an entrepreneur, including the fears and stress. Irrespective of my own reflections, it also contains many descriptions and analyses of the transactions involved in selling a company that have taken place in the past. A lot of space is devoted to what information regarding the sale means for the company itself and to the outside world. For the most part, these are the insights and observations of someone with experience who has carried out many such transactions.
Purchasing a company
Chapter 2 is a symmetrical reflection of the first. It describes the process of buying a company seen through the eyes of an entrepreneur who is investing their own money. Similarly, it includes information on an example of a transaction timeline, description of entities supporting the buyer, as well as many descriptions of company acquisitions that actually took place on the market. Unlike Chapter 1, the text devoted to the purchase of a company is enriched with a description of standard company valuation methods together with an original approach to this topic. For obvious reasons, the knowledge about business valuation can also be used when selling a company, but also, for example, in analysing the economic sense of a merger of two companies. The chapter also contains many references to actual transactions that were carried out in Poland and around the globe, illustrating theory through examples.
Typical provisions in shareholder agreements
Chapter 3 contains a compendium of knowledge about standard legal provisions that are usually found in a company’s sale and purchase agreement (SPA). During the first transactions, few entrepreneurs and managers are aware of their existence and importance. It would seem simple that legal formulations are then crucial in running a business. Statements, assurances, guarantees, granting pre-emption rights, options, escrow accounts – most people can’t recall all of these concepts and use them in the right context during contract negotiations, even if they previously learnt about them during MBA studies. Few people realise that the text and conditions of an agreement are just as important (and often even more important) than the negotiated price. The chapter contains descriptions of a dozen or so legal structures used in various situations, together with references to specific transactions in which they were applied. These are not precise legal definitions, but rather the advice of someone with experience on how to use the relevant provisions or, knowing their mechanisms of action, protect against the effects.
IPO transactions
Chapter 4 of the book gives basic information related to the process of listing a company on the stock exchange. Here, you’ll find a formal description of the next steps of the entire process, and learn what making the company public looks like from the perspective of employees and managers. The initial public offering (IPO) is a great experience in the history of every company, and is an unforgettable moment in the professional life of every manager. Therefore, irrespective of all the economic effects associated with the process, the book also focuses on the soft elements of management that can be used during an IPO.
Incentive programmes, stock options, good PR for the company – these are problems that few theorists focus on. In the text, I tried to share my personal experience in listing six companies on the stock exchange (in Poland and abroad), and carrying out many secondary offerings.
After this, the book naturally follows on from previous chapters. Many company acquisitions are carried out to merge them with the acquiring company. The fusion of two companies is an extremely complicated process and, therefore, often ends in total failure.
Company mergers
Chapter 5 identifies the basic risk associated with this, and based on an analysis of actual mergers of well-known companies, attempts to find a solution of how to avoid such risk together with the reader. During the process, many managers focus on the quantitative objectives of the merger, such as cost reduction, increasing revenues, more efficient use of the database and, as a result, increasing profits and share prices. However, they pay little attention to the qualitative elements of the fusion. In this chapter, I attempt to draw the readers’ attention to the aspects of cultural differences of merged enterprises, the inevitable competition for positions, and the risk that after all is said and done, one plus one will not equal two-and-a-half but one-and-a-half. Finally, as a little piece of trivia, I present my own business examples in which a division of an existing entity proved to be a better strategy than expansion through the acquisition and absorption of more companies.
Idea for a book
When writing this book, I was primarily thinking about the first generation of Polish entrepreneurs. To some extent, this is a continuation of my previous publication – Simply Business. This time, it’s for those who already have a medium or large company and are thinking about the next step.
Like managers, many entrepreneurs after seven or ten years of developing their company feel slightly burned out and at a crossroads. The company doesn’t give them as much joy as it used to. They’d like to change something, but don’t really know what. Is it time to sell the business? Or on the contrary, is it time to take a step forward and take the company to the next level? Perhaps it’s time for aggressive acquisitions, which on the one hand will change the nature of the entrepreneur’s work, and on the other, will increase the company’s market share? The political transformation that took place in Poland at the turn of the 1980s and 1990s unleashed incredible layers of entrepreneurship in the society. Over the next 20 years, millions of new businesses were created from scratch. Two or three new companies rose up in place of one that went bankrupt. As time passed and competition increased, new ventures found it harder and harder to succeed. The market became increasingly mature, and the changes that occurred in developed countries over a decade took two or three years in new EU countries.
The obvious result of the development of the capital market was the appearance of buying and selling transactions or mergers of entire companies. On the one hand, some entrepreneurs who achieved success after many years of hard work decided to retire and sell their companies. On the other hand, there is always a group of both domestic and foreign investors who want to accelerate the development of their corporations. Running a start-up is becoming less and less certain, and the effect is visible only after some time, so why not look around the market and buy an existing company? The market for such transactions, additionally supported by the mass privatisations that have occurred over the last 20 years, is beginning to grow very rapidly.