Ready To Be Acquired?
Like A Good Marriage, Finding The Right Partner Takes Time
Starting my professional career as an attorney who advised clients on merger-and-acquisition strategies as well as post-merger integration issues, I was afforded a unique vantage point from which to launch a promotional products distributorship that later would acquire and be acquired.
In 1996 I founded Corporate Imaging Concepts as a means to satisfy the entrepreneurial spirit that was part of my DNA. After being a coach/lawyer, it was time to be a player/owner. Twenty years later, I have acquired a distributorship, acquired the regional offices of competitive companies as well as their individual salespeople and, more recently, sold a majority interest in Corporate Imaging to Berkley Capital—the private equity investment vehicle for W.R. Berkley, a private equity investment firm focused on long-term growth.
Done right, being acquired can be the pinnacle of your career. As Corporate Imaging continues to acquire other businesses and offices, I stopped to reflect on the lessons I have learned along the way, albeit not always gracefully.
Maximize the value of your asset, not just the sale price. No doubt the company you built was the result of your economic risk, grit, determination and toil. And, you know that you counted on many others to build your enterprise. Whether it was the first employee who blindly trusted your vision, the supplier who extended your payment terms at a time of critical need, or your spouse who gave you the freedom to work those extra days and nights, they all had an important role in your success.
When evaluating options, understanding what this new partnership means for your employees and suppliers, spouse and family, all constituents, is vital. There will be tradeoffs and you will have to be comfortable with how you resolve them. While maximizing the value of your investment should be the goal, you need to clearly define what “value” means to you. Is it job security for you and/or others? Do you and you alone receive the treasure? Should you ensure that all suppliers are paid from the proceeds? There are many questions to contemplate. Make certain the structure of the transaction leaves you comfortable with what the future will look like for all who helped you arrive at this day.
Know your new partner. The time to gain comfort with and confidence in each other is early in the transaction—before a deal is signed. You want to do all you can to make certain that the ‘marriage’ will work, that the parties are a good fit culturally, that the two companies have a shared vision, and that the roles and responsibilities post-closing are acceptable to all. Contracts and professional guidance will paper the deal. But a lawyer I once worked with gave me some good advice: “A great contract with bad people is a bad deal … a bad contract with great people is a good deal.” This axiom is true for both sides.
Do the best you can to ensure you will be working with good people on both sides so when an issue arises—and issues will arise—your first move is not to pull out the contract but to suggest a discussion where each of you has confidence in the other to be thoughtful and reasonable. Making sure that you find a partner with a long view who will be reasonable in good and bad times is critical to a good marriage.
Communication and planning are critical. After an acquisition, employees don’t know what to expect. While owners have been through the diligence period, have made this critical decision and have become comfortable with its implications, most owners try their best to keep their plans secret. Many times, employees are finding out the ‘great’ news at closing. Throughout the negotiation, the selling owners must balance the legality of what can be shared with what they wish to share, while appreciating that employees on both sides of the deal will engage in speculation. Throughout the sale process, doors will be closed, strangers will walk into offices, conversations may be overheard and the rumor mill will start to churn. Employees will be understandably nervous about their positions, their compensation, what changes will occur and, selfishly, how it all impacts them.
Understand this: while you may be celebrating, sharing smiles, handshakes and a toast with your employees, internally many employees will be uneasy. Managing the human and humane side of a deal is key to maximizing the deal’s value for all involved. Effective and consistent communication on all sides is critical.
Employees and integration. Assessing the culture and strength of both companies is imperative. Getting disparate cultures to mesh well is a difficult task. Naturally, during the process of integrating companies, employees may show resistance to change rather than embracing new policies, procedures and sales methods.
It is crucial to determine who the social leaders are within a company and engage their assistance in understanding and implementing your new, shared vision. It is always about the people. This is easy to say and hard to do.
Know your strengths. Hopefully the acquiring company has undertaken a comprehensive review of its own strengths and weaknesses, and how the acquired company supports its vision. This path should be clearly articulated with both parties and agreed to in advance of closing.
The success of many acquisitions may be blunted when two companies continue conducting businesses independently without a move to a shared vision.
May the best idea win. What does the acquiring company offer to you that you do not possess independently? What do you have to offer the acquirer? How will this opportunity present a win to you, a win to your employees and a win to the acquirer?
Find a partner that embraces change—where the best ideas win. Getting two companies to mesh well is a daunting task. Employees and owners alike are concerned about what lurks in the darkness after the combination is announced.
Having lived on both sides of the transaction, I share some final thoughts: Life is different after acquiring and being acquired, but different can be invigorating. If you take your time to find the right partner, the tradeoffs and life post-closing can be what you want it to be. You will have extra money in your pocket. You may be able to shed the worry about HR, IT, accounting, financing, etc. For whatever you do not enjoy, there will be teams to take care of these details. A deal should free you up to do what you want to do and what you do best.
Brian Abrams is a CPA, lawyer and currently serves as executive chairman of Chicago-based distributor Corporate Imaging Concepts, LLC. This year Corporate Imaging will serve more than 1,000 clients, process more than 125,000 online company store orders, and is among the industry’s top distributors in revenue. Most recently, Abrams was honored as ASI’s Distributor Entrepreneur of the Year.