Whilst this all sounds like we’ve got mergers down to a T, we’ve made a bunch of mistakes and recognised some key learnings along the way. Below, we’ve highlighted just a few.
Most business owners have the goal of growing their business to increase revenue and profits, and to build authority and reputation in the marketplace. Whilst organic growth may take some time, growth through mergers and acquisitions can provide a successful way to amplify growth in terms of both staff and client base rapidly. Sounds like a no-brainer to hunt down those competitors who are looking for a way out, and to take over their company. But mergers and acquisitions aren’t always easy sailing, which is a lesson Carbon Group have learned over the last couple of years since executing a total of six mergers/acquisitions within twenty-four month time frame. We’re well on our way to achieving our goal of having ten hubs across Australia. Our staff have grown from 14 in 2014 to over 70, across four offices locations up from the initial one. Whilst this all sounds like we’ve got mergers down to a T, we’ve made a bunch of mistakes and recognised some key learnings along the way. Below, we’ve highlighted just a few.
Ensure the retiring partner still has an interest in the business
One of our original transactions was a complete walk in walk out, which turned out to be a nightmare. The retiring partner had mentally checked out of the business prior to sale, which meant that execution of hand-over suffered. We learned that employing the existing partner for at least the first 12 months following the transaction works significantly better and allows for greater continuity for the clients, as well as the existing staff. Sometimes the retiring partner may have been trying to exit for some time and thus not been providing their clients with customer services levels you would expect. It is very hard to win the clients over as they are already looking elsewhere and might as well change. Now, we look for business owners who are looking for a succession plan for genuine reasons, such as retirements, or location changes, but still want to see the business succeed. This ensures they will continue the relationship with the client and offer them great service, which we can then migrate to ensure a seamless transition.
Look for similar systems
Ensure they operate with similar systems and procedures as much as possible. For example, if you offer fixed billing and they use timesheets, it is difficult to rollout this new way of billing to their existing clients. You run the risk of losing clients who may not be happy with being switched over, which reduces the value of the merger straight away. It’s important to minimise the number of changes you make upfront, so as not to disgruntle clients and staff. Same with accounting systems and workflow products. If you only use Xero and merge with a firm that solely uses MYOB for example, clients need to be migrated over to the new platform which may prove to be too much of a change for some after years of using a certain system that works well for them.
Choose location wisely
Do not try and span a distance that is too great geographically or else clients and staff will feel unloved and that its too far. Whilst cloud-technology allows all work to be completed from any location, on any device, nothing beats face-to-face interaction, so it’s important that the office location is still within reach for clients. It helps to instil faith in clients that they are still valued and that you’re close-by if need be. We offer quarterly/monthly catch-ups with our clients, and gain some great insights and feedback from them, that we otherwise wouldn’t have heard if the communication was only over email. We’ve altered and improved our services as a result of this feedback, so it’s important not to disregard the value of personal interactions with clients. Ensure the office is in close proximity to your client base to help achieve this.
Happy staff = happy business
When merging or acquiring a business, the staff are the greatest asset that you are bringing over, so ensure they are the right fit for your company. Ask a lot of questions regarding their values to help understand if they will be a good fit to transition into your existing business. Culture is a big deal within certain companies, so if you have a strong culture, there’s no point merging with a company and taking on their staff if they are the complete opposite of your existing staff base. It may result in conflict between staff members, which can only be a negative thing, and may come to the point of affecting the service clients are receiving. Ensure you dedicate time to getting to know the new staff members. It’s a big thing for them when their place of employment is being taken over, so spend time re-assuring them that the merger is a positive venture and outline the benefits they’ll experience.
Have a proven roll out plan in place
During our first couple of mergers, we were unprepared and had the attitude of “just going for it”. The saying failing to prepare was preparing to fail soon became apparent. Planning is crucial, and having a solid roll out plan right from the beginning helps build trust and shows that you’ve done this before and know what you’re doing. This plan should include many of the items we’ve listed above; allocating time to spend with staff, contacting all clients to introduce yourself, and having set stages to implement any required changes. Whilst you may be eager to get to work straight away with getting your systems and procedures in place with the acquired business, it’s not effective to make sudden changes, so ensure this is gradual. A great way to meet clients is to organise a sundowner. We’ve done this for each of our mergers, and it’s been effective in providing a casual environment to introduce yourself and the company, and give clients the opportunity to ask any questions or express any concerns they may have. On top of that, it’s the perfect opportunity to promote any additional services your business may be able to offer them.
Ensure everything is documented
Ensure everything is documented and a full assets register is included in the contract. With one of our transactions, we loosely wrote it as all equipment to run the business and we were later held to ransom and forced to pay additional amounts of money for the computers and phone system that were apparently not part of the original contract. You don’t want to be stuck with additional costs, so draw up a contract and go through it with a fine-tooth comb.
With each merger or acquisition we have undertaken, we’ve learned new things to implement into the next one. Each will be different in some way, but the key is to have a procedure in place, but allow for flexibility where needed.
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