Learning from BlackBerry and Twitter

You might have read that BlackBerry’s current takeover offer of $4.7 billion from its biggest shareholder, Fairfax Financial Holdings of Toronto, collapsed on Nov. 4.

Only three decades ago, the Canadian company known for producing its line of tablets and smartphones controlled 43 percent of the marketplace for personal and business usage. That figure has dwindled to only 3.8 percent in 2013. After cutting nearly 40 percent of its employees following a $1 billion loss last quarter, the company signed a letter of intent to sell 90 percent of stocks to Fairfax at $9 per share.

The organization’s stock price peaked at $230.52 in July 2007. The inventory is now — after the bargain disintegrated — $6.49.

After an innovative leader in its area, and the inventor of the QWERTY keyboard that was popular before touchscreen devices, BlackBerry appears to have been unprepared in forming an exit strategy. The CEO appointed in January 2012 to rejuvenate the organization’s foothold in the marketplace has resigned. The company borrowed $1 billion in Fairfax and a group of institutional investors, to offer a cushion.

What can you learn from BlackBerry’s struggle? First, the value of understanding your market worth . BlackBerry apparently waited too long to realize the smartphone industry was changing, and its inflexibility to adopt shifting consumer needs led to its near elimination from the smartphone and tablet market. Second, it’s imperative to have an exit plan that are you prepared to go to before your organization hits dire straits. BlackBerry might have sold before it saw the writing on the wall. By waiting too long to market , BlackBerry’s evaluation has plummeted.

Another extreme is a good example of a business selling in its developmental stages before hitting full maturity is Twitter, which is reportedly valued around $30 billion now, having recently completed its first stock offering.

The ideal exit strategy is to sell your organization at or near the summit, before it begins trending down. The challenge of course is calling when you will begin to go down. In case you’re growing year after year and you know that the cause of expansion will continue, you can probably put off exit factors. But if you aren’t certain if you’ll grow this year, think about a valuation and exit strategy.

The lesson here isn’t to wait to sell. A wise businessperson takes advantage of an earn-out when selling to shield against undervaluation. The company could be sold at a price that’s justified by its current evaluation, but the company is ensured even more with carefully negotiated earn-out arrangement for unrealized future potential.