Why did you decide to scale through acquisition?
Acquisitions mean we can grow much more quickly. It’s riskier but it’s quicker. We think we can run those businesses better, and make them more profitable and valuable.
What have you learned from your acquisitions?
The most important lessons are: never believe what the vendor tells you, always get proof, and never compromise on what you need to see to be sure they’re telling you the truth. The other thing is never underestimate how disruptive it can be to do an acquisition, how much time it takes, how much cost is involved, and how much it disrupts your existing business.
How have you defined and refined your acquisition process?
I have a process driven approach almost like a sales and marketing model. I build a pipeline, bring the deals in and analyse them before passing them on to fulfilment. We have defined stages with clear objectives when finding acquisitions. The first stage is finding new people who might want to work with us. The second stage is to start a dialogue and keep them warm for when they are up for discussing a sale. The third stage is analysis and the fourth stage is heads of terms.
Where have you used advisors and got most value from them?
Advisors have been very useful. At the lower deal size, we only use legal advice and accountancy which is adequate. We have standard legal contracts, so we don’t always need legal advice if it’s small. We do use legal advice for larger deals and corporate finance advisors have proved valuable.
How have you funded your acquisitions?
We got bank debt early on when we didn’t need it to build a track record of paying debt easily. We have used cash generation to acquire, borrowing when we needed it to build a buffer. I plan to use debt as far as I can but I’m aware that debt is cheap but unforgiving while equity is expensive but supportive.
How have you ensured most value from your acquisitions after completing the deal?
For integration to be successful, you need to make sure it’s fully resourced with strong leadership. Make sure you have enough resource for business as usual and integration to happen at the same time.
The person heading up acquisitions needs to be more than a manager; they need to be a leader who can create and drive a clear plan, who can report on topline issues, and make great judgement calls. Someone who gets it done. We have someone dedicated to overseeing and executing acquisitions.
You also need a strong process. We created an ops manual with a list of tasks which we add to and amend after each acquisition wash-up. It seemed like overkill at the start, but it ensures we stick to a process and learn.
A big lesson was underestimating what the owner does and how active they are in the business. They can leave a big hole and you need to prepare for this.
What have you done to prepare for a potential future exit?
From an exit perspective, I think it’s best to have everything rolled in and integrated under one brand instead of creating a group model. It’s important to think about what the market wants to buy and that your acquisitions don’t deviate from that so you’re always well positioned.