merger and acquisition
The overwhelming majority of approaches to buy small independent businesses
fail at that first hurdle – the current owner usually values their business higher than the ‘objective’ market price. If your suitor tells you everything will be the same post-acquisition, that you will be left alone to carry on running the business exactly as you were before with minimal interference, they are probably telling a white lie, just to protect your feelings you understand… Make sure you’re clear what the synergies are, and they are real and palatable. There could well be synergies you recognise and welcome. Perhaps the acquirer has routes to new markets and customers for your products, or complementary products you can cross-sell to your customers, more funds to invest in your products and technology, or more professional marketing. On the other hand, they could really be after your customers and a few key people who manage your customer relationships – probably including you – and plan to shut down the rest of your operations, transferring the work to themselves. Are you comfortable with that? Be sure you know what the synergies are, they are achievable and properly reflected in the price.
n Do you have shared dreams?
If the acquirer is primarily concerned with maximising short-term profits with a view perhaps to selling the company again in a few years at a handsome profit, while you have a passion for learning, and a goal to build a lasting business providing excellent service to your loyal customers, this marriage is likely to end in tears.
The e-learning pioneers I know are proud of what they have worked so hard to
build and loyal to the colleagues and staff they employ. Very few are in it to get rich quick, and if they are, they have probably chosen the wrong business! Which leads perfectly to Tip 6…..
n Can you live together? Perhaps the most important of all criteria for a successful M&A. Small businesses tend to have a culture and management style reflecting their
owners.
If you built the business, you probably live and breathe it. You know your customers well, and the strengths and weaknesses of your staff. You may encourage a fairly relaxed working environment knowing when you need it your team will go the extra mile. You perhaps manage by walking around. You know when to get involved and when to leave your team to get on with it, and you probably know the business so well you can make key decisions on instinct. All that’s going to change. This isn’t your business any more. No matter how strong a sense of ownership
you have, you’re now working for someone else, someone who doesn’t know your business the way you do, and will manage by the numbers – EBITDA, project margins, revenue per head, process efficiency. That isn’t necessarily a bad thing; more formality and structure may be needed to help the business grow, but it’s certainly different. How do you feel about that?
e.learning age june 2015
“I never knew what real happiness was until I got married. And by then it was too late” – Max Kauffmann
n Don’t have a shotgun wedding Selling your business is a one-time decision. You cannot undo it if it doesn’t go the way you wanted. Give yourself time to be sure it’s the right deal and the right fit. If at all possible, move in together first and find out about that irritating snoring
before it’s too late. Is there a project you can co-operate on, to have the chance to get to know each other better?
n Establish what the deal really is worth In the end, if you can negotiate all the practical hurdles, it will come down to price. If the offer is all cash up front that will make life easier, but even so beware of salami slicing. The initial offer may look attractive but it will be wrapped in caveats, and you can be sure those lawyers and accountants will be delving through the DD trying to identify opportunities to reduce the price. Maybe you recognise revenue differently from the acquirer, or have a different accounting policy for capital expenditure. Maybe a key client has a clause in their contract enabling them to cancel in the event of a change in ownership. All these will be used to negotiate a reduction in the price. More likely the deal will include an earn-out for yourself and key staff. It may look generous and help bring the headline value of the deal up to an attractive total, but think carefully. Will you be empowered to achieve the earn-out targets or will you be constrained by group restrictions on resources and spend? Most importantly, will you survive long enough to receive the earn-out? It’s commonplace for the senior management of the selling company to be gone within months. How are you going to react to no longer having control, to those inevitable changes in culture and management style, and when the new owners make what you regard to be a flawed decision?
n Till death us do part? History reminds us of previous M&A splurges – remember Adval, Futuremedia, Intellexis, or the Huveaux acquisition of Epic? There have been success story along the way, especially if you judge one criteria of success in terms of the entrepreneurs who have managed to sell their businesses at an attractive price rather than necessarily by what happened to the business and people that they left behind. But, will it be any different this time round? Is our industry finally maturing and if it is, does size actually matter? Only time will tell…
Peter Phillips is founder and CEO of still independent Unicorn Training
17
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46