What Is a Window of Opportunity?
A window of opportunity is a short, often fleeting time period during which a rare and desired action can be taken. Once the window closes, the opportunity may never come again. In a competitive market with many participants seeking to maximize tangible or intangible value for their constituents—whether owners, other shareholders, employees, or perhaps their community—the window will shut fast as soon as a good deal is recognized.
A window of opportunity can apply to a variety of situations, and sometimes they go unrecognized.
- Windows of opportunity are short periods of time within which a key decision can be made that will produce a desired outcome.
- Windows of opportunity are often fleeting, and if the window closes before the decision is made, the chance can be lost forever.
- In investing, trading opportunities for hot IPOs, a real estate purchase, or a chance at an M&A deal all present themselves as windows of opportunity.
Understanding Windows of Opportunity
Also called the critical window, a window of opportunity is the short period of time within which some action can be taken that will achieve a desired outcome. Once this period is over, or the "window is closed," the chance to take the opportunity is no longer possible.
In some cases, it is possible to plan for and anticipate a window of opportunity and then act accordingly when the window opens. Many times, however, an opportunity arises that is unforeseen, and it is up to individuals to identify the opportunity and then to act on it. In situations with very brief or unpredictable windows of opportunity, automation may be employed to take advantage of these windows, as in algorithmic trading.
In some cases, critical windows may be artificially imposed (or even falsely implied) as a marketing tactic to encourage action—for example, with a "limited time offer."
Examples of Windows of Opportunity
The Subscription Period for a Hot IPO
Institutional investors and the best retail clients of the underwriters for Google's IPO in 2004 were given a chance to buy shares at the initial offering price. Those who took advantage of the window bought these oversubscribed shares at $85 per share. The shares ended the first day of trading at just over $100 per share.
Mergers and Acquisitions (M&A) in a Sector With Scarce Assets
The biotechnology industry is extremely active, with dozens of startups and firms in early-stage pipeline development of therapies with blockbuster potential. However, history has shown that a vast majority of these firms will not be successful with their clinical trials.
For the distinct minority that demonstrates efficacy and safety in their therapies, a group of large-cap pharmaceutical and biotech companies will take notice. Then, a window will open for acquisition. Celgene Corp., prompted by a series of positive data readouts by Juno Therapeutics, Inc., agreed to acquire the development-stage immunotherapy biotech firm for $9 billion in cash in early 2018.
Building or Land Purchase
In 2015, Facebook purchased a 56-acre industrial site in Menlo Park, Calif., from Prologis, Inc., and in 2016, the company exercised an option to purchase one million square feet of office space, also in Menlo Park, that it was leasing from the Wisconsin Investment Board.
Since the area is highly desired by expanding high tech companies, Facebook made sure it acted quickly to secure the real estate. This was certainly for the benefit of the company, but it also was advantageous for the thousands of employees to have a large centralized home base for intellectual and social synergies.