Let's Make a Deal
M&A Company: Gill Studios Inc., Lenexa, Kan.
Paul Lage, president and CEO of Gill Studios Inc., believes in growing organically. That's not to say he isn't open to acquisitions if the targeted company fits in with Gill's core business and is something Gill cannot develop on its own. Such an opportunity presented itself in June last year when Barton Nelson, a Kansas City, Missouri-based manufacturer of adhesive notes, scratch pads and non-adhesive cubes, abruptly closed its doors after 53 years of operations.
Two weeks later, after much speculation, it was announced that employees of Barton Nelson had yet to receive back-paychecks and were unable to access their retirement accounts. According to Lage, the courts and creditor were in possession of the distressed company. Furthermore, employees were displaced and customers had to fend for themselves. Fortunately, Gill Studios was ultimately able to find and rehire most of the staff.
On Sept. 4, 2014, the new company, Gill Bebco LLC (marketed as Bebco Line), reopened. So, why go through all of that trouble? "We took all this risk because we had a product line that fit into our many requirements for an acquisition," Lage explained. "We wanted a product line that was in alignment with our own expertise and since it involved adhesives and printing similar substrates, we felt that this acquisition was worth the risk."
Prior to completing the acquisition, Lage wondered how well the two cultures would mix. "In a distressed acquisition, it is important to identify why a company was not succeeding," he said. "Many times it is a result of a few people, not the entire organization. Other times, it is that there wasn't enough critical mass for them to succeed and their overhead requirements could not be sustained because of their sales.
"Either of these situations would be good candidates for acquisition," Lage continued. "Other situations like the market changed or their processes and technologies were no longer relevant, then those candidates would not be something that we would look to buy."
With the Barton Nelson acquisition, it was important for Lage to form a focused team to work through the details and stay on schedule. Lage also pushed for open and honest communication to avoid the potential fallout from miscommunication. "I always find it best to be very transparent with everyone involved to express your intentions of the future," he said. "Everyone in the process—from government to the associate—has to make decisions."
WORDS OF WISDOM
"It is natural for a company to force the company they are buying to fit into their company and adapt to their culture. They tend to replace the management team and seek out just the financial synergies," Lage observed. "When you do this you often time lose the benefits of the acquisition." Instead, he recommended learning where the company excelled and preserving that legacy. Then, determine where they struggled and fill in the gaps accordingly.
Lage offered one final piece of advice: Don't rush to meld the companies. "You need time to evaluate your new asset and to preserve the talent in your organization," he said.
M&A Company: Safeguard, Dallas
Safeguard is no stranger to the M&A process. Since 2008, the company's BAM (Business of Mergers and Acquisitions) program has completed 95 transactions. Two of those transactions, in particular, stand out to Scott Sutton, director and vice president of Safeguard Acquisitions Inc.: the first completed transaction (Prestige Business Systems, Farmington, Utah) and the most recent transaction (Fontis Solutions, Irvine, Calif.).
"If you look at the sizes of those two businesses and the complexity of the transactions, you quickly note how much our BAM program has evolved and how committed our entire organization has been to growing through the BAM strategy," Sutton said. "It's fun to look at the more than 50 transactions completed for the benefit of our distributors."
The first attribute Safeguard looks for in a potential target is a shared vision. "It's really important for us because the one thing we have learned is you have to have companies, and people within those companies, that align with your vision and your culture if you want to achieve the best outcome," Sutton commented.
Safeguard also scopes out talent because as Sutton put it, this is a "people business." "I think more than anything else, long-term success is, first and foremost, defined by the people in the organization you're looking to acquire; the people associated with these organizations we are acquiring," Sutton said. "[...] We are looking for strong leaders, successful business people, and a staff focused to provide answers and solutions to customer needs and challenges."
When those two objectives are met, Safeguard then shifts focus toward customer growth. "[Now that] we've achieved the other objectives, we know that the customers being added are being served well and we have a bigger opportunity to bring even more products and solutions to each," Sutton noted. The May acquisition of Fontis Solutions is a great example. In addition to providing manufacturing, supply-chain and logistics expertise, Safeguard announced in a statement its intention to broaden the company's product and service offerings, including those in critical areas such as technology and marketing services.
While Safeguard has completed an impressive 95 transactions, Sutton said the biggest challenge he's encountered is simple and consistent: No two businesses are alike. "Companies that have the same revenue and same offerings don't necessarily have the same processes, operations or philosophies," Sutton explained. "Companies that look alike and act alike may operate very differently. We have to look at every business independent of others, which is our first challenge."
Integration is another challenge. "When you think about integrating these businesses into our system, there are aspects that are easy and aspects that are hard, and those vary from deal to deal," Sutton remarked. To mitigate any risk, Safeguard works hard to approach each transaction with a full understanding of the unique aspects that every company brings, Sutton said.
WORDS OF WISDOM
Still trying to determine the fate of your company? Sutton urged business owners to think about their overall strategy, culture and what they're trying to accomplish for their stakeholders and customers.
Then, there's the issue of relevancy. "Being acquired might be the smartest decision to remain relevant and have the resources available to continue to grow and supply customers with solutions and employees with opportunities," Sutton said.
If you're considering buying, Sutton believes the decision should be part of a holistic approach in order to be more compelling to customers. "A lot of companies think that the company looks really good on paper, but that's only one piece of the puzzle," he concluded.