Sometimes business deals are not all about the money

Finding the right buyer or investor can be sometimes be very personal, and these considerations can outweigh the financials

Usually when people think of big business deals like M&A or Initial Public Offering (IPO) transactions, they immediately go for the numbers. Analysts, ever keen to build beautiful spreadsheet models, often dive into the financials first at the expense of other considerations such as strategy or personal motivations of the founders/owners.

Its the wrong approach. Numbers are important, but not always the driving force. Personal motivations of founders, family considerations and cultural identity can play an outsized role. I was reminded of this today when I read about Highlands Coffee’s planned IPO in Vietnam. Vietnam is the world’s second largest coffee grower and exporter (with exports to 20+ countries in 2024). Within this market, Highlands Coffee has risen to become the largest coffee chain with an estimated 40% total market share [take that Starbucks!!].

Over the last decade, they have grown at a blistering pace. By 2024, they had over 850 stores and grew revenues by 13%. They enjoy a strong local presence and connection in Vietnam. And more growth could well be on the way. Vietnam’s economy grew 7% last year and is benefiting from a significant investment boom. The company also has sizeable ambitions to grow their brand in international markets while emphasizing their Vietnamese origins. The importance of being “Vietnamese” is emphasized everywhere.

For example, the image above highlights their factory presence in Vietnam. They boast “25 years of history”, “ready to bring the taste of Vietnamese coffee to friends from five continents” [original text in Vietnamese, I translated it here].

They had originally planned to IPO in 2019, but this was put on hold due to Covid. Rumors again started to spread in 2022, but nothing materialized. Today’s news indicates that the IPO plans are back on and are more advanced than ever. Investment bankers have been engaged, the roadshow is being prepared, the CEO is giving interviews. Early indications suggest the IPO will value Highlands Coffee at $800 million. To put that in perspective, the entire Vietnamese coffee market was estimated to be worth $816 million by 2030.

This planned IPO valuation is bold. But given its strong business and growth prospects, it would well achieve this target. Probably the easiest place to IPO would be the US markets with the deepest pools of capital and large investor base. Rumors are that Highlands’ investment bankers first proposed listing in the US. The founder rejected it. Then they suggested Singapore or Hong Kong. The founder rejected it.

You guessed it. He insists on having his IPO in Vietnam. He has publicly acknowledged potential trade-offs of doing this, including the possibility of getting a lower valuation. But his quote below says it all:

“Our success is because of our Vietnamese customers, of our Vietnamese employees…our story is the Vietnam story”

Its not all about the money.

For those thinking of buying or selling businesses, it is important to ask and understand what are the non-financial value drivers you want to protect. Are there potential trade-offs you are willing to accept to ensure they are preserved? Community roots and engagement, cultural identity, personal legacy etc.?

This is not solely the domain of “small business owners”. It matters for bigger businesses as well. In the case of Highlands Coffee, the company may be worth over $800 million. The owner likely has enough money to be happy. For him, staying true to the company’s Vietnamese roots and remaining a “Vietnamese company” is mission-critical and he is clearly prepared to accept potential financial trade-offs.

Deals are not always all about the money. Non-financial considerations can have outsized importance. It is important to be open and upfront about these as they are critical to finding the right buyer, seller or investor for your business.