Secrets to Selling Your Business
Wednesday, June 2, 2010; 12:00 AM
RecentlyGoogle acquired DocVersefor $25 million. DocVerse allows a group of users to share and edit Microsoft Office (Word, PowerPoint and Excel) documents in real time without having to e-mail them back and forth. Google plans to integrate the DocVerse technology into its Google Docs application, accelerating its adoption.
But why did Google buy DocVerse instead of just creating its own technology to imitate what DocVerse had built?
The answer lies in the three questions large companies ask before they make the decision whether to build or buy. The first two questions they ask themselves; they ask the seller the third question. Preparing a bulletproof answer might be the key to sealing the deal.
No. 1: Can we build what they have created?
Maybe your company has a unique piece of technology or a patented product that can't be copied. Good for you. Most businesses don't enjoy such deep and wide protection, so a competitor willing to invest the time and money to replicate your business can provide you with stiff competition.
Google has access to some of the smartest engineering talent on the planet and more money than most countries, so it's safe to assume it could have built what DocVerse created. So why didn't Google just build its own DocVerse?
It comes down to the company's answer to the second question:
No. 2: How long would it take and how much money would it cost to build what they have created?
Assuming an acquirer wants what you have and the company can buy your business for less money than it would cost to build what you have created, then you are an attractive acquisition target.
In the case of DocVerse, for $25 million Google instantly got access to a piece of technology it wanted. Could Google have built it from scratch? Sure. Would it have taken more time and cost more money than simply buying DocVerse? Yes again. Therefore, the company got acquired.
DocVerse was founded in 2007 by Shan Sinha and Alex DeNeui, two Microsoft veterans. They didn't hold out for decades trying to build a billion-dollar enterprise. Instead, they deemed $25 million a nice return on three years' work and cashed the check.
The third question was undoubtedly asked of Sinha and DeNeui directly, and it will be asked of you when you are ready to sell your company: