Rich Couples

Like every MBA student, Dwight Schultheis was waiting for a business idea to inspire him. Then he noticed something: He and his male friends had shaving-related skin problems, and the products they used didn’t help.

Months of market research and a few focus groups later, his upscale men’s grooming products company, Amenity, was born. The New York City business has grown to nine employees and annual revenue surpassing $1 million–quite a leap from last year, when Schultheis and co-founders Lisa Lehan, 28, and Kimberly Pecoraro, 32, started the company with $500,000 from personal funds and angel investors. “We’re trying to be a first-mover and innovator in the men’s category [of clinical grooming],” he says.

Moving could get a little trickier now that the proverbial 800-pound gorilla has entered the market. In January, Schultheis, 32, learned that Procter & Gamble was acquiring DDF, one of Amenity’s competitors. The news brought a mixed bag of emotions for Schultheis, who was excited that such a big player saw potential in the $75 million U.S. market for men’s premium skin care but also worried that DDF would be even more competitive with Procter & Gamble’s marketing, innovation and distribution power behind it. Amenity spent the following weeks reassessing its business strategy. “If we’re going to stay competitive,” Schultheis says, “we’re going to have to sharpen our mission.”

How will you stay competitive when a big company acquires one of your competitors?

If you don’t plan to sell anytime soon, try not to panic about the entry of big players in your market. They can bring good things to your niche, like attention and new customers. But you’ll have to carve out defensible ground by continuing to innovate and narrowly defining your audience, says Robert Hoffer, managing director of Newforth, an investment banking and consulting firm that has completed more than $1 billion in M&A transactions.

Going after a manufacturing or distribution partnership with one of the acquiring company’s competitors or a private equity firm can also help your company generate brand marketing and channel capacity to counteract the advantages the large acquirer hopes to gain in the space. Besides, the acquiring company’s competitors are probably studying your market anyway. In Amenity’s case, “P&G’s competitors are likely to be looking in [the men's skin-care category] now,” Hoffer says. Schultheis and his two business partners, meanwhile, are willing to consider an acquisition offer and have written an exit strategy for Amenity.

Finally, remember that more than 50 percent of acquisition deals fail. Says Seagroves, “Just because a competitor gets bought by a Fortune 500 company doesn’t mean that’s going to be a good acquisition for that competitor.”

source Entrepreneur

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