Dr. Earl R. Smith II

DrSmith@Dr-Smith.com
www.Dr-Smith.com

One of the major sins committed by Boards of Directors comes in the structuring of the compensation scheme for senior management – particularly the scheme for the CEO. Historically, most members of a senior team have received a multiple of their base salary in the form of options. In the past, boards have linked the rising value of the shares of a company to the incentivization of management – in other words, give them options that are only valuable if the share price increases. The weakness in this scheme is the increasingly difficult challenge of creating a public market for shares – as through an IPO. Now that companies are ’staying private’ longer – or, sometimes, not going public at all – the options become valuable only if another private investor comes along with an interest in purchasing them. Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

In the first four articles in this series, I discussed the difficulties of cultivating and maintaining innovation in a corporate environment. In this article, I would like to describe two companies. They addressed the challenge of cultivating innovation from two quite different directions. The first was a case of too much innovation while the second was the more traditional case of too little. Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

In the first three articles in this series, I wrote about the challenges of attempting an exit under current conditions through acquisition or merger. The combination of buyer power and uncertainty in the financing markets makes those options very dicey for sellers. In part four and this article I focus on what I see as the most viable exit strategy – a deferred exit. Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

Some years back there was an organization that ran an annual event focusing on the love affair between the venture capitalists and entrepreneurs. I began attending during the late nineties and found the cultural dynamics so interesting that I continued my annual visits until the event finally was no more. One of the most interesting things about the conference was that the panel composition stayed the same over this period – two venture capitalists, one CEO who had received investment and another who had built a company without outside investment. Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

The balance of power in the M&A market is constantly shifting. It tends to swing back and forth between the extremes – now favoring sellers and later buyers. It is widely recognized that we are in a period when the pendulum has swung far over to the buyers’ side. There are a number of reasons for this – bad past investment decisions that have come back to haunt them and they are now much more cautious, uncertainty in the financial markets that make estimates of the terms of financing (and sometimes its very availability) hard to predict and a general uncertainty about the future are three worth mentioning. One of the most important advantages that buyers have in this environment is to be able to demand and receive exclusivity in negotiation. Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

Yesterday a friend asked me if I thought that mergers and acquisitions was becoming a ‘buyer’s market’. My first response was, “what planet have you been living on for the last several months?” Then I responded to his question. “It’s not just a buyer’s market – it is a turkey shoot.” Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

In prior articles in this series, I focused on the management culture that establishes and maintains innovation. My focus was on the interaction between the tactical visions of the CEO and senior management team and the strategic visions of the Chairman of the Board and members of the Board of Directors. However, successfully managing the mixing of these ‘analytic’ and ‘creative’ types is only the first step in the process – one that enables but does not accomplish the cultivation of an innovative culture. Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

I am sometimes asked to engage with a company that is facing a survival crisis. Whether it is the investors or the CEO who issues the initial invitation, the environment that I find myself entering is generally fraught with tension. Most time the two camps have separated and are pursuing what they see as their best interests. The investors, long disabused of the golden visions of rapid growth and profitable exit strategies, are focusing on protecting their capital and are forcing the CEO and senior team to take steps towards that goal. The CEO and team are facing the possibility that the compensation scheme that they have benefited from is about to end. They tend to be interested in persuading the investors to put in more capital. Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

For some time after the bubble burst in the late 90s, the most viable alternative to going public was building the business or intellectual property of a company to the point where it could either be an attractive acquisition target or have enough dry powder to embark on a acquisition program of its own. Recent indications from the M&A space have shown just how difficult that alternative has become. Read the rest of this entry »

By Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
www.Dr-Smith.com

In the prior articles in this series, I focused on the general problems and some of the specific issues which come to fore when a company sets about to develop a culture which supports and encourages innovation. In this article, I would like to focus on some of the characteristics of leadership that best support such an effort. Read the rest of this entry »