By Margery Krevsky
Jan. 21, 2010
Doing an acquisition is one way of building your business. My first acquisition, after over 20 years in business, was a learning experience. Although each deal is different and has its own nuances there are some basic facts I learned on this journey to the signing date that may be beneficial to other business owners thinking about an acquisition or on the precipice of making it happen.
I did not have to search for a company to buy; the owner came to me. I knew of this company as they were a competitor and the owner had actually done research on my company and others and we were their target buyer. My immediate need was to do a mind shift from “hot and heavy” competition mode to the good rapport and positive professionalism needed to work through and conclude a deal. This took rethinking.
The preliminaries began with a “Non Disclosure” document signed by both parties. My attorney was contacted and in the loop on all discussions from the very beginning of the venture. I learned after many years in business to always consult with your attorney. However, the seller had a different philosophy about attorneys and began legal discussions at the end of the process. So there were different schools of thought. I depended on my attorney for guidance during the entire process to get the right contract and legal protection regarding each phase of the deal. Having an attorney I have worked with before was critical as we did not have to build a professional bond. We had it in place. My attorney knew me well enough to assess what my reactions would be to different segments of the deal. The lack of an attorney on the other side resulted in some catch-up for them during the late phases of the deal.
At the beginning of the process I thought this would be a simple matter of getting a price agreed upon and a legal agreement. I told my attorney this at the beginning of the process. At the end we laughed as there is no such thing as a simple deal. If you do correct due diligence, lots of research and “fit” management needs to happen.
Even though I highly respected my attorney to help me through the process it would have been foolish of me to think I was just going to sit there and let everything come together. First, I connected with one of my TEC / Vistage Members (a professional group of business owners) who is an owner in a large merger and acquisition company. I asked if he had a list of basic items he could share that need to be reviewed or accomplished. He sent me an invaluable list and I read every word. I also consulted the Web site of Visage to “bone up” on items to review.
Doing this homework was important, as I became familiar with the correct verbiage and legalize. Then I created my own document called “Do I Buy This Company?” It was simple AND straightforward, No Legalize Here. It outlined:
1. The major Facts in 10 bullet points.
2. What I Liked, What I Questioned, What I Needed To Do
3. Financial and Tax
4. Equipment
5. Employees
5. Legal
6. Business Plan for the Future
This “Do I Buy-¦” document was the outline for information we knew, information we wanted, questions and a deep dive into all aspects of the proposed company.
I felt fortunate to have in place a strong vice presidential team, each with an area of expertise. The VP/CFO began the inquiry into the historical financial information and a projection for future revenues. This VP also handled the HR areas. Since our total benefits were more robust this was a lead item in positioning ourselves with future employees. The VP in charge of sales analyzed each future employee for fit and cost. Also, a projection was created for future sales, growth and a timeline to accomplish the goals. We knew this would change after 30 days and a post deal analysis, but we needed a starting point. Our VP of operations was in charge of the physical move, equipment, logistics, computer setup and new construction in our current location.
One of our main concerns was the difference in cultures between the two companies. We knew even if the deal went smoothly and was finalized, we needed confirmation the employees were willing to positively move and could accept our culture. It was also a concern on their end. The employees could not help, but be skittish as we were the big bad competitor and now were a proposed new employer. All the rumors and gossip from the past years as rivals were at work. The owner of the company and me agreed to hold a meeting for the new employees in our office at the end of a working day so we could do an informal introduction, history and future plan of our company. This would include me and three vice presidents and the employees and owner of the other company.
We created a PowerPoint showcasing highlights of our company. We each gave a talk about our position in the company so they could get a feel for us. The importance was not so much our words but our delivery, body language, and openness to welcoming them. At the end of this session we gave them a tour of our offices; showed them where we were going to physically place them. We stated we appreciated their culture and wanted to maintain as much of it as possible, as it was working for them. Each person got a private “one on one” session with our HR person and the VP of the division. We prepared a document for each stating their salary, benefits, position, hours, and pertinent items to them. If there were issues we asked they be put on the table so neither of us had any surprises.
This worked well for both sides. Recognizing the cultural deference’s and focusing on it prior to signing was one of the best things we did.
After the deal was signed and the employees moved to our location we held an all-employee party to welcome the new folks and introduce the “home team” to them and vice versa. We had a buffet luncheon complete with the introduction of a new logo incorporating both company names. The deal was done, but not the effort to manage and promote good synergy in the office. HR was critical to being on top of any issues and it was important the new physical space was as great as we had explained.
The acquisition process was indeed a learning process for everyone in both companies. Now that it is complete we have a list of bullet points unique to our industry, a trained team who has carried out the process, a legal team who knows us and our business even better, and the satisfaction that our new people have enriched our business and we are giving them new opportunities and challenges to grow.
Margery Krevsky is the President/CEO of: Productions Plus – The Talent Shop located in Bingham Farms, MI. She is also the author of “Sirens of Chrome: the enduring allure of auto show models,” from Momentum publishing and president of Purely Pro Cosmetics. Reach her at m_krevsky@productions-plus.
