How One Company Positioned Itself for the Ultimate Exit Strategy

Being bought out by a large company is the exit strategy nonpareil for a growing number of startups today. Negotiated well, buyers typically give sellers a significant equity for their efforts and the founders often get to stick around to run their company under a big corporate umbrella without the stress of ownership.

But successfully positioning a small company isn’t as easy as pioneering an idea or product in the right niche and performing well enough in the marketplace for a big corporation like yours to recognize it needs to buy up the niche company before someone else does.

Ask Mark Ramadan, co-founder of Sir Kensington’s, a small maker of condiments that earlier this year was targeted for acquisition by consumer-packaged-goods titan Unilever. The Dutch giant was searching for niche and growing food brands to supplement mature processed-foods line ranging from Hellmann’s Mayonnaise to Ben & Jerry’s Ice Cream, and the foodie-fueled success of Sir Kensington’s ketchup, mustard and vegan mayonnaise caught Unilever’s eye.

“We’re excited about benefiting from their 100 years of knowledge while remaining independent,” Ramadan told Chief Executive. Unilever executives said “you know what you’re doing, and we’re here to help amplify that and not mess it up.”

“too-easy capital is encouraging an environment of entrepreneurs who have just taken for granted that the money will always be there.”

But the deal was far from serendipitous. Ramadan said he and co-founder Scott Norton had been working strategically toward such an outcome for much of Sir Kensington’s seven years in existence.

Ramadan shared the key aspects of how Sir Kensington’s got itself ready for just such an opportunity. Seeing the preparation through the acquiree’s eyes could help potential buyers like yourself better understand what they’re getting and how to value the deal.

1. Being who you are. Early on, Ramadan said, it was clear that Sir Kensington’s was going to grow because it identified an opportunity and mission in better-for-you food and pursued it single-mindedly.

“We learned that we needed to be very clear to ourselves, our team and the outside world who you are,” Ramadan said. “We’re not just what we make, but we have a mission, values, and a purpose starting with ‘why?’ Why are we showing up to work every day? In our case, it’s not to chase a fad or a trend or make money but to … contribute to our customers’ lives and those of our partners and employees.”

2. Shoestringing as much as possible. Ramadan believes that the too-easy capital being showered on many food startups these days “is encouraging an environment of entrepreneurs who have just taken for granted that the money will always be there. Clearly that is not the case, and at the end of the day you need a strong, real, profitable, growing business.

“There’s no harm in using capital to get a jump start. But you want to use it wisely and have the intent of turning the business into a strong, independent company—and as quickly as you possibly can.”

3. Prioiritizing the team. Not only is Sir Kensington’s about the mission, Ramadan said, but also “who you do it with”—the “team” in the broadest definition, to include suppliers and coo-packers and others as well as employees.

“Do they believe in you, in your chances? Will they let things slide if you need help with payment terms” Are they really attached to the brand and your mission? Then you’ve got something special. Employees and others either stick with you or they don’t.”

4. Identifying a cultural fit. Though Unilever is a giant company, it had proven its ability to allow a quirky founding culture to continue unmolested after acquisition by buying Ben & Jerry’s several years ago—and basically leaving it alone.

“They’ve been able to maintain an activist mind set,” Ramadan said of Ben & Jerry’s progressive political bent, a key part of the brand since Ben Cohen and Jerry Greenfield founded the company in 1978 in Burlington, Vt. “There are good track records of acquisitions by big food companies, and not-so-good ones. Unilever had an excellent track record.”

5. Remaining part of the team. Unilever’s desire to keep on Sir Kensington’s original management “was a big part of why we did the deal in the first place,” Ramadan said. “We were only at the beginning of what we wanted to build, and we didn’t want to leave the business. We’re excited about having more resources and scale, and we’re staying. We get to keep doing what we’re doing and reach more people.”

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Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.

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