Why Getting Bought Out Is The Worst Business Goal You Can Have

Growing a business for the sake of it getting bought out doesn’t make sense on a personal level but also on a business level.

We all pursue growing a business for various reasons. Those reasons primarily are connected to the goals that we want to achieve and from there, our actions, and judgement are based on that as well.

The goals that we set determine how a business will grow and how we will focus our priorities.

And it’s because of those things that certain goals that we set can do harm to both ourselves and to those around us.

Today I’d like to focus on one particular goal that can do far more damage than what most realize.

It’s the goal of hoping your company gets bought out.

I’ve said in the past that this goal is bad on a personal level for some key reasons.

  • First, it forces you to focus more on boosting the brand and making connections over making a really good product/service people will buy.
  • Second, you’ll fail to realize numerous problems as you are growing your business. With a narrow focus, you’ll forget key things companies need to grow further.
  • Third, you’re more likely to hit a glass ceiling after a time and run into various problems during the growth process.

With the mindset and expectation that you’ll get bought out, you’ll find yourself in a situation where the chances of that happening will occur once in a while, but not enough that it’ll keep you afloat. But I’d argue that getting bought out doesn’t make a lot of business sense either. Especially in this day and age.

Consider The Attitude Of Businesses

In a 2016 speech, Simon Sinek performed a speech that talked about why leaders in businesses had no clue what they were doing. This was founded on two lack of skills, empathy and perspective.

Throughout the speech, Sinek discussed a series of standard business practices that are still used to this day. But one of note in that speech was referring to the lack of perspective.

There are two types of games that can be played: finite games, and infinite games.

Finite games have a fine group of players, agreed rules, and a set of objectives. Think of it as a game of soccer or baseball. Once the timer ticks to 0 or you’re out of innings, the game is over.

In the infinite game, it’s defined as having known and unknown players, rules that can be changed, and the objective of the game is to keep the game going. Players will certainly leave the game once they run out of the will or resources to continue, but they aren’t losers.

Where business ties into this, is that many individuals believe they are in a finite game. They use language like “We are trying to beat the competition.” or “We’ll be number one.”

People will brag about their accomplishments when Forbes or Inc Magazine says they’re one of the top 25 strongest companies in the world.

That sort of attitude also feeds into how business is conducted. Because with a finite game there is a clear winner and loser. And if you’re not one of those top 25 or top 50 companies, it’s easy to slip into the mindset that your company and you are a loser.

So what happens?

Well, businesses start buying other businesses.

They start acquiring resources in order to stay in the game for longer periods of time.

And while your chances of getting bought out are higher in this environment, it does far more damage the further we look into it. But above all, getting into this mindset where your company’s goal is to get bought out is further incentivizing this sort of environment that the business world has become.

Acquisitions And Mergers Heighten Wage Inequality

A paper in 2015 researched by Jason Furman and Peter Orszag found that the potential inequality between wages can stem from acquisitions and mergers. They found that in the research, some businesses were earning what they called “super-normal returns.”

These returns were roughly 10 times larger than the typical returns they would receive on an average year. These returns were given to both the executives of the company but also the shareholders as well leaving very little or none left to those below.

It’s likely for this reason today why many large companies see the appeal in merging and buying out other companies. It’s great for business and can boost returns for both shareholders and for themselves.

At the same time, it distances executives further away from the rest of the workers who are making the business function. And from there, it’s easy for executives to be in the mindset to see the workers as mere pawns as opposed to real human beings.

And that’s the real pain.

Because those kinds of executives will focus more on the output as opposed to being a decent human being. Expecting employees to work harder and more for them just so they can get paid more and never trickle any more money down to the workers who are making all of this happen.

And this sort of culture persists when people are in the mindset of getting bought out.

It Creates Less Competition

But one of the most harmful things that setting this type of goal does is that it can lead to less competition. Of course, the government needs to sign off on every merger or buy out, but these mergers and buyouts wouldn’t happen without the businesses agreeing to the proposed terms when they negotiate these things.

And this becomes a lot easier if the company is bent on being bought out.

But the real problem from these mergers and acquisitions is that those who are doing this aren’t companies outside of the industry they’re buying in. They’re already involved in the industry.

And it’s there that creates this issue.

Because less competition in an area incentivizes companies to put less effort into making quality products or services.

And even when a company gets bad press, it doesn’t necessarily damage them. Remember back in April last year when a man was dragged off of United Airlines? People were outraged and moved to boycott the airline company.

But in 2015, the Obama administration allowed the merger of two big airlines — Continental and United.

That merger made United one of the largest airline that carried the vast majority of domestic passenger traffic.

Boycotting United was literally impossible for most people flying within the US.

And United just sent a message to its loyal customers that they don’t care about their passenger's safety or wellbeing.

And it’s hard to stand up to companies like that. Because some people don’t have other options. And the only real way to change that is to have competition. To have companies who aren’t willing to get bought out. Or at the very least don’t get bought out by their own competition.

Furthermore, the lack of competition means that businesses are able to hike prices with very little backlash. After all, many industries today are oligopolies where price pressure is pretty low. There are only so many options that we can choose from as consumers.

It Creates Mass Stress And Unease

But above all, it does a lot to the people around you and involved in the business. One thing that follows mergers is layoffs. Some businesses have ample and qualified team members already and don’t need this other group of people.

Even if that group was working on the project they just acquired for longer than this new group.

This creates a lot of stress because if your goal is to get bought out, that means you’re jeopardizing the livelihood of your employees. This means that the group you spent building up is now off to fend for themselves.

All because your goal from the start was to be bought out so you can further your own goals.

It creates a lot of anger and frustration, especially if the company is small. But even if the business is acquired and the workers from the original team stay on, there still is a lot of stress and unease.

Like a former owner hanging around at a consultant capacity after they were bought out, their days are numbered. There will be a point where the company will deviate from the former owner’s original intentions. All the same, they’ll start pushing the workers who share similar views to the former owner away as well.

To the point that they will eventually get laid off or leave. But during that process, there is a lot of unease. It creates a culture of “follow or get left behind.” And it’s a toxic culture because it involves people becoming who they are not.

And we know what sort of damage that does to someone mentally. There are so many workers today who are unhappy because they don’t understand the company’s goals and the culture forbids them from having a voice or else they may be laid off.

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I’m not saying we should put an end to mergers. Instead, I think it’s important to look at mergers in a different light. But also to change how we view business.

The fact that people have goals or intentions to merge or get bought out by their competition is the root of the problem. Stronger companies are in the mindset to win and be the last one standing and weaker companies will take the easy way out without holding ground or finding new and creative ways to get ahead.

And all of that is encouraged by the culture and environment that we are in. And this culture continues to persist a little longer when someone with the intention of getting bought out enters this infinite game.

An infinite game that will never have a winner or a loser.

Entrepreneur, positive-minded. I used to say a lot, now I do a lot. Documenting my growth. Support me on Patreon: http://bit.ly/2pIEPFR

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