Right people, right place, right time
During 2019, Inflexion supported 52 add-on acquisitions across nine countries for its portfolio. We spoke to leaders of three of these portfolio companies on their experience.
It’s no secret that carefully selected M&A can greatly enhance a business. From providing access to new markets or to new product lines, the right acquisition can truly transform a company. But as many experienced business leaders will know, the trade-off is taking the time to ensure it is done correctly. This means identifying suitable businesses, understanding how to approach management and negotiate terms, and lastly – but most importantly – integrating the business post-deal to ensure all synergies are harnessed.
Whether you’re seeking to buy a business in Birmingham or Bangalore, having people on the ground is key. “Choose your advisers locally when buying abroad,” advises Frederik van Tuyll, Chairman of Ocorian, a business which has done five acquisitions in a two-year period, ultimately expanding employee numbers from 250 to 1,250 and seeing its geographic presence increase from 8 jurisdictions to 18. “Don’t look only at market size opportunity, but also your ability to execute. You may be able to see a huge market which seems very appealing, but then find it’s difficult to transact and so regret it down the line.”
The next key consideration in M&A is timing: getting the timing right and taking the time to get it right. The first add-on Ocorian did after Inflexion supported its carve-out from law firm Bedell Cristin in 2016 was MAS. It had been a target three years prior, however a lack of financial firepower meant it didn’t come to fruition. “After our MBO, that firm actually approached Inflexion, who made the deal work financially.”
Sometimes the opportunity can sneak up on you, as Alyn Franklin of risk management firm Alcumus learned. “We knew a transformational acquisition was on the cards in a year or so after Inflexion’s investment, but in fact a great opportunity came in a matter of weeks, so we did it.” He is referring to the £47 million acquisition of Santia, supported by Inflexion just nine weeks after Alcumus’s own £92 million buyout in October 2015. “We then undertook another acquisition just a few months later. Once we realised we were on the hook for each of them, we brought in advisers very quickly. We’ve leaned heavily on Inflexion too, as they’re very experienced in M&A and can introduce some sharp people to the process. Most recently we’ve bought eCompliance in Canada. The acquisitions have really sped up our technological journey.”
M&A doesn’t work without the right people powering the process, so ensuring the right mix of experience and bandwidth is key. “The reality is your management team can waste an extraordinary amount of time assessing things that may not come to fruition. So we now have an internal M&A team who take this on so that management can continue to manage,” Frederik explains.
The excitement that can surround M&A can entice people in. Says Alyn: “Everyone wants to get involved in an exciting project so ensuring management stay focused on management and have certain people focused on the acquisition is important.”
And they need to be the right people. “Our lack of knowledge was limiting, plus the time-zone difference created barriers. We had to be on our A-game every step of the way,” recalls Alyn. “We needed to overprepare as we weren’t the obvious choice for eCompliance. There were also process differences from US advisers compared to our own – we had some blips which got us wound up given the time difference, but in the end we won the process despite not being the highest bidder.”
Rather than signal the end of a process, getting the acquisition over the line is in fact the start of the next leg of the journey. Acquiring businesses can mean a wealth of new products, intelligence, clients, locations – but reaping the benefits requires thoughtful integration. This includes the people involved, and this can be the trickiest bit owing to the emotions involved.
“This takes time,” cautions Frederik. “You’re often dealing with a former competitor and suddenly they’re meant to be your best friend. This can be more complex if it’s overseas owing to different cultures.” Additionally, evolving roles can be tricky, and a good manager of 20 may not be a good manager of 100. “You cannot assume your best manager will be up to the task. You need to respect them by asking rather than assuming, and then see whether or not they can actually do it.”
James Stevenson, CEO of wealth management specialist Succession Group, is extremely familiar with acquisitive growth: the firm partnered with Inflexion in 2014 to undertake an ambitious consolidation strategy with a view to acquiring 60 member firms, with more than 50 already over the line. “We have experts that go in after each acquisition has taken place and they look at how the individuals can get involved in the wider group. It doesn’t happen overnight; it takes time and that cultural journey never stops. Having people going back into the businesses and feeling part of the structure is really important, and so we’ve invested heavily in our HR team.”
He points to the stark reality that 90% of Succession’s 650 people didn’t choose to work there, but were brought in through the M&A journey. Buying so many small, regulated businesses with a diverse range of personalities is tricky because they are suddenly working in a medium-sized corporate. “It’s crucial to be really clear about your own company culture and values. Rebrand the business quickly, make it visible right away, and put people on the ground right away.”
You’re often dealing with a former competitor and suddenly they’re meant to be your best friend. This can be more complex if it’s overseas owing to different cultures.