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Acquisition strategies to scale

Friday, 27 April 2018 11:49 AM | OPERATIONS & LEGAL

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What are the golden rules of acquisition? How do you avoid brokering one of the 70 to 80 per cent of deals that fail or – worse – buyer’s remorse? And, does a taste for acquisition mean waving goodbye to your day job?

As WPP executives clear the desk of its venerable chief executive – the founding father of acquisition to scale – we thought it an apt moment to explore the varied strategies employed by others on the hunt for a new deal.

This week, The Supper Club went in pursuit of some answers. What are the golden rules of acquisition? How do you avoid brokering one of the 70 to 80 per cent of deals that fail or – worse – buyer’s remorse? 

And, does a taste for acquisition mean waving goodbye to your day job?

In our latest Speaker Boutique at Osborne Clarke, our Programme Director Alex Evans brought together members Charlie Mowat, founder and chief executive of The Clean Space Partnership; Mark Cornwell, founder and CEO of HPS Group; Dan Scarfe, chief executive and founder of New Signature UK to share the pleasures, pitfalls and pointers of acquisition. As a distinguished advisor to owner-managed businesses looking to acquire, our partner Matt Katz, head of corporate finance at Buzzacott was on hand to impart his expertise.

Here’s what we learned.

To hold hands or to kiss and punch? 

As Richard C. Morais in Forbes put it in his 2008 article Kiss and Punch: Sir Martin “urges his operating executives to ‘kiss and punch’. He first holds each company vigorously accountable in quarterly budget meetings but then backs off and lets each firm reach its benchmarks in its own particular way. One executive described Sorrell's system as ‘corridors of freedom.’ With ad agencies like Ogilvy and JWT often battling for the same piece of business from their respective silos, the "punch" simply means that each brand must fight its own corner.”

But is kissing and punching still the preferred approach? Or, is it better to assimilate into a single brand?

Charlie Mowat believes in the latter. He has grown his cleaning business by making 10 acquisitions over seven years; buying up businesses that either operated in different geographic markets or were already eating into his market share. His commitment to The Clean Space philosophy – on which he founded the business – made this choice easy: all clients would be rebranded and trained to operate in The Clean Space way.

Mark Cornwell takes a different view. While his marketing agency, HPS, has built out its skillsets and capabilities across the marketing spectrum, by buying smaller, specialist consultancies—none are fully assimilated into the one business. Each retains a separate P&L but are encouraged to work together, referring, cross-selling and collaborating across disciplines to seize a larger slice of the marketing mix—and budget.

Letting go of his company name was one of the biggest struggles for Dan Scarfe. Upon being acquired by Columbia Capital on a buy and build strategy, Dot Net Solutions was subsumed into New Signature. Despite its clear benefit to the business – elevation to an internationally recognised brand, an expanded client base, and a greater capacity to scale – Dan admitted he was conflicted about letting go of a brand he had nurtured. “Ultimately, though, the UK operation retained its reputation and operational independence which quickly transposed into the New Signature UK brand. Inclusion as part of a bigger group which can out-big the smalls whilst out-smalling the bigs is now delivering clear benefits.”

Decide whether you want to build an acquisition brand

We reported in our Talent Tactics guide earlier this year that companies were increasingly building an employer brand—one not directed at its customers, nor its stakeholders but its potential talent base. 

Now, the conversation around ‘acquisition brands’ is gathering pace. The ultimate acquirer brand, of course, is WPP—often misdescribed as the world’s largest advertising agency, ironically, it’s always had business, not advertising, at its core. 

This was echoed in this week’s Speaker Boutique as Charlie Mowat spoke of the importance of building a reputation as a company to whom you sell your cleaning business. The tactics are remarkably comparable with any brand-building exercise. Charlie recommended garnering testimonials from selling founders and noted that direct mail was surprisingly effective at generating leads. “It’s a nice, non-intrusive introduction,” said Charlie, “particularly for those who want to sell but simply don’t know how.” 

The notion of an acquisition brand is becoming far more commonplace, not least because – according to many of our panelists – once you have a taste for acquisition, it’s often hard to step back to the day job. 

Five nuggets from the panel

  • Always have a strategy and know what you’re trying to achieve with the acquisition—whether it’s to diversify or grab market share.
  • Don’t spend all your money and then ask your bank to fund it—start acquiring with debt.
  • Never believe what a vendor tells you—it may be in good faith, but it’s not always accurate. Take Ronald Reagan’s advice: ‘trust, but verify’
  • People are a priority: get to know them, one to one, to find out who is likely to stay or go—could you just poach the talent without the cost and stress of an acquisition?
  • Ultimately: plan negative; think positive.

If you’re hungry for more insights from the Speaker Boutique, stay tuned. We’ll have a highlights video live next week, complete with one-on-one interviews with the panel.

And, to see what we’ve got coming up, visit our events page here

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