The MAUS that Roared

Have you ever considered selling your business? Do you have any kind of exit strategy? Something to consider if you're ever thinking about retiring, enjoying an extended getaway, or even leaving a legacy for your family. Peter Hickey gives us his full account of building his business, selling it in the height of the I.T. boom, and then buying it back several years later at a much reduced market value.

The Original MAUS

MAUS Business systems began in 1990 as a management consultancy specialising in business planning.  The consultancy quickly became busy and the owner, Peter Hickey, started developing questionnaires and systems, which he then realised could quite easily be turned into software products.  With the consulting work and business planning software sitting side by side, it quickly became obvious that the software had greater potential than a one-on-one consulting model, so in 1995 the focus of MAUS shifted to software and distribution.

With a marketing background, Peter understood that there was little competition for the MAUS product range, so there was an opportunity to build market share and a powerful brand.  He advertised the products in a range of business magazines and followed up enquiries with direct marketing, as well has having a retail presence in stores such as Harvey Norman. Interestingly, the direct marketing revenue stream was always stronger than the retail sales, but Peter saw two reasons that the retail presence was important.  Firstly it provided competitive prevention, i.e. potential competitors thought that the market for similar products was already being catered to, and secondly it made MAUS appear to be a much bigger organisation than it was.

By 2000 MAUS Business was going from strength to strength and with the IT industry growing strongly, people began suggesting that Peter could sell the business at a great price.  As he started to explore how a business is sold, Peter was a little intimidated by an industry he had never had exposure to and decided that he would retain a top accounting firm to represent him.

His reasons were:

• It gave him access to international buyers

• It provided credibility

• The internal due diligence carried out before the business was put on the market reassured Peter that all the company’s documentation would stand up to the due diligence that would be undertaken by a purchaser and gave him access to international buyers

A buyer was found and it looked like Peter had achieved what every small business owner dreams of, but not long after agreement was reached, the sale fell over.

Soon after this, Peter was at a networking dinner hosted by a supplier and he met representatives from a multi-national business who indicated they were interested in looking at MAUS as an acquisition.  Now more comfortable with the “lingo”, Peter decided to handle this deal himself.  After six months of negotiation Peter signed a letter of agreement and after another four months of due diligence, MAUS Business Systems was sold.

The MAUS Goes On

Few buyers want a vendor to walk away from a sale with no ongoing involvement in the business.  After all, it is the entrepreneur who started the business and made it successful, so much of the goodwill lies with them.

Like many vendors used to having control of the business, changing roles and working as an employee for a large business for three years was somewhat frustrating for Peter.  He was no longer able to quickly develop new ideas and products because the parent company saw this as a risk to its reputation and image.

He was also not able to drive his people as he had in a small business setting, but he was also unable to give them a strong sense of ownership over their work and the direction of the business, which had been able to do previously.

Once Peter had met his obligations with the new owner, an early retirement loomed; but as is the case with many entrepreneurs, retirement was not as enticing as he appeared.  Peter realised he needed the challenge and sense of achievement of growing a business.  Yes, it was wonderful spending more time with his family, but it wasn’t enough.

MAUS Revisited

What could be more rewarding than selling a business?  How about buying it back?  The reality was that the very things that made MAUS a successful SME, made it hard for it to succeed in a corporate setting.  The company Peter had sold to decided to divest themselves of the business and Peter was the natural buyer.

Although he had ongoing business interests, Peter did not want to spend time building a brand, so acquiring the MAUS brand back was a perfect solution.  The best news was that financially, buying it back was a bargain.  So once again the fire is back in the belly of Peter Hickey and he is showing all the enthusiasm of a start-up business owner.  He is hiring staff, starting to market and develop new products.

After going through a sale and acquisition, it is the next logical step for MAUS to support its start-up and growth products with a business exit product.  This will mean the MAUS range will cover the lifespan of a business.

Peter’s advice to other business owners thinking of selling includes:

Selling

• Develop an exit strategy that distances the owner from the operations of the business
• Implement as many systems and procedures as possible
• Make sure the company has a replicable business model that provides recurring revenue
• Look for strategic buyers who will benefit from integrating the business with existing business operations

• Understand that buyers often come from people close at hand, like family or staff

• Venture Capitalists are interested in high-risk high return opportunities
Angel investors are normally wealthy individuals prepared to fund a business. They usually want to see an exit strategy.

The Numbers

• Owner operators generally get a multiple of 1-2 x profit for their businesses

• Take time to get the financial results as good as possible before going to market
Strategic buyers are often better negotiators but often are prepared to pay more

The Future

As baby boomers retire, there will be more businesses on the market, and people thinking of selling will need to make their businesses stand out from the crowd.  Conversely, there may also be more retirees looking at buying a business that fits in with their lifestyle and interests, so there will also be more buyers.

For Peter Hickey, the future is looking exciting.  He now knows himself better than he did before selling his business and he understands he will always want something meaningful to develop.  For now that is MAUS, and he is ready to roar!

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Source:  Peter Hickey interviewed by Paul Buckingham
for the Small Business Mentor Club