REPORT ON Opportunity Squared or Halved...
Food for Thought Event
What are the benefits, or not, from forming a joint venture, merging your business with another or making an acquisition?
These questions formed the basis of a discussion at our debate on Wednesday 20th May at Ridgeview Wine Estate, which was attended by MDHUB members with our panel of experts, Rod Scott (CEO of Waer Systems), Norman Mayhew (MD of The Sussex Sign Company) and David Ward (MD of VW Heritage).
Between them, the panel had vast experience of mergers, acquisitions and joint ventures some of which had proven to be highly successful and some of which had fallen by the wayside. Here’s a snapshot of some of their hints and tips together with input from some of the delegates.
- Do your research and due diligence… there’s usually a reason why people want to sell – find out!
- Understand the people in the company you are considering merging/partnering with – are they like-minded?
- Be cognizant of what you are buying – what’s on the balance sheet?
- Be clear about the reason for the acquisition – is it the right time?
- Consider the market conditions… if the company you are looking to acquire have lots of customers in the building trade and that’s not doing well, then think again.
- Know who the ‘rogues and villains’ are in your market.
- Beware what a buyer wants… do they really want your product or just your customers?
- Take responsibility for your actions and be prepared to take drastic action, perhaps staffing cuts will be needed or additional finance required.
- Be prepared for a ‘rough ride’.
- How will our competitors feel about this? If the answer is ‘scared’, then it’s probably the right thing to do.
- Why do they want to sell… do they just want an easy ride or are they open to change?
- Are they as ambitious as you are?
- Are their seemingly good customers loyal or is it time to renew contracts and there’s a possibility they might be looking elsewhere?
- Is their company culture a good fit with yours? How will it affect your staff – will they be on the same page and have the same values and ethics at the beginning?
- Get to the price early on, otherwise it could all be a waste of time.
- Be clear about your expectations of any directors remaining on board both in terms of their objectives and how long you wish them to remain.
- Banks would generally encourage the current incumbents to stay on as they know the business inside out.
- Two years would be normal but it can be as much as five years so be sure that you can work together for that length of time.
- Try not to get personal as it makes it difficult to pull out if you decide against and you may get swept along!
- Be honest from the beginning about what you are looking for.
- Don’t buy just what looks good on paper – it’s also about your company values so spell these out at the beginning and decide if you are on the same page.
- Accept that sometimes, it’s just not meant to be, but usually works out for the best in the end.
- Listen to people close to you or who are included in your business (friends, family and colleagues).
"There's no right or wrong way"
David Ward, VW Heritage
"Acquisitions look good - on paper."
Norman Mayhew, The Sussex Sign Company
"However much satisfaction and pleasure you get from running your own business, nothing quite compares with the thrill of putting together and closing a strategic transaction."
Rod Scott, Waer Systems