Mergers & Acquisitions is always a hot topic, especially in the technology world. How could it not when there are deals out there like last year Facebook buying Instagram for $1 Billion with no revenue. In the MSP world, we are hearing more and more about acquisitions because of this ‘consolidation phase’ everyone keeps talking about. But M&A is really like celebrity breakups, it makes for good headlines, but at the end of the day it’s only part of the story.
Last month marked the 1 year milestone for my family and our companies. We have published an eBook on the top lessons we learned but I wanted to share a few extra tidbits of information that didn’t all make it into the eBook.
An M&A Transaction is HARD! I don’t care what anyone tells you or what you hear but I would argue that the percentage of deals that actually get done is less than 2%. To properly do a transaction it will take almost every mental cycle you have for 3 to 6 months and probably that of your finance team. And that’s assuming you know your stuff. This process will completely disrupt your business and therefore, the least amount of people you can tell for as long as possible, the better.
M&A should not be the goal, but part of the strategy. If you’re goal is to build up a company to sell it then there is a good chance you will be disappointed. Potential acquirers can sense this and usually by the time you’re ready to sell it’s because things are starting to go a little wrong and you want out, otherwise why sell a fast growing and profitable business while you’re in control. It has to be part of a strategy, like for us, we wanted to grow and take the group to the next level and after exploring all angles, we felt being acquired was the right choice.
Prepare to Emotionally Disconnect From your Business. Every business has 3 prices. The price the buyer is willing to pay, the price the seller is willing to sell, and the price the deal actually gets done. Usually the latter is in the middle and closer to what the buyer is willing to pay. When you begin the due diligence process and making presentations you will have random strangers poking and prodding about your business. Why did you do that? Why did you spend so much on that? Have you considered doing this?, etc. You need to prepare yourself to disconnect emotionally and treat the business like a financial transaction to not cloud your judgement.
Telling Your Team Will Be Hard. Although we work in technology where everything is always changing, people struggle with change. You’ll have those that completely understand and agree, those that don’t know why you’ve ‘sold them out’, and then a group that don’t really care and just go with the flow. The toughest to deal with will be the ones that feel sold out and you’ll have to take the time and make sure they get comfortable but the unfortunate reality is some never will. What worked well for me was I met with the entire team a week after the announcement to answer questions and that put a lot of people at ease.
Look for a partner that matches you. We searched for a partner that matched our values, vision and culture. At the end of the day, that’s what makes your company a unique place to work and that’s what keeps employees engaged. Engaged employees will also help keep that retention high because there’s nothing worse than doing a transaction and then people leaving. That hurts everyone, buyer, seller, clients, employees.
Looking back after the first year is behind us, there were a lot of things we did right, a few we could have improved on, but overall it was very successful.