Four Things To Keep In Mind When Navigating A Merger Or Acquisition
Before founding BodeTree, my co-founder and I spent the bulk of our careers in finance. The world of mergers and acquisitions was all-too-familiar, but we always viewed it through the lens of large corporations.
Because of our experience “on the other side of the table,” so to speak, we never really stopped to consider what an acquisition would look like for our organization.
In reality, acquisitions come in all shapes and sizes and can help businesses reach their strategic goals more rapidly than simply attempting to develop initiatives in-house.
We learned this first hand after recently completing our first corporate acquisition.
After breaking into the franchise industry last year via our flagship financial management system, we fell in love with the space. The franchise market is full of passionate entrepreneurs who are dedicated to helping people achieve their dreams via business ownership.
Our guide to this unique world was Kristofer Nieb, founder and president of VelocityFD, one of the most well-respected franchise development companies in the nation.
As we learned the intricacies of this highly insular industry, my team and I could watch Velocity at work up-close. We saw how they forged deep, lasting relationships with franchisors and helped them to grow the number of franchisees in their system.
I quickly realized that if we were to combine forces, BodeTree could become a major force in the world of franchising. If we could find a way to bring to bear all of our financial, technological, and intellectual resources, we could shepherd franchisors throughout their entire lifecycle in a way that no one else could.
I felt that it was time to bring a fresh, modern approach to the incestuous world of franchising, and Kristofer Nieb’s VelocityFD was the perfect vehicle to do so.
After months of negotiating, we were able to reach terms and finalized the acquisition earlier this year. The process was enlightening for all parties.
Now that we have the luxury of hindsight, four key lessons emerged from the process.
Set a clear strategy at the onset.
In my experience, companies typically get acquired for one of three reasons.
- The buyer views them as a potential threat;
- They offer the buyer a quick path to incremental growth; or
- They allow the buyer to drive innovation in a new industry or market segment.
As a buyer, it’s important to understand why you’re looking to acquire a potential company. First, this strategic clarity informs the nature of the negotiation, validation, and structure of the deal.
Second, and perhaps more importantly, it enables you to create a clear narrative around the deal. This narrative is vitally important when it comes to generating buy-in among your team, board, clients, and the target company itself.
For me, the Velocity acquisition was always about innovation and market expansion. Franchising is such a huge industry, but in many ways, it’s one of the last vestiges of a bygone era. Processes are often inefficient and, by extension, expensive for the consumer.
BodeTree possessed the skills, resources, and technology to make the space more efficient for everyone involved, but there was one thing we lacked: relationships.
Franchising is about relationships, plain and simple. If you haven’t been part of the industry for many years, it’s nearly impossible to break in. You need a guide, and for us, that had to be Kris Nieb and the VelocityFD team.
Kris brought over 20 years of experience to the table and helped us navigate the subtleties of the industry. We didn’t view him as a competitor or as a way to make a quick buck.
Instead, we knew that by partnering we could bring about significant positive change in the industry. It was that narrative that helped us to sell the deal both internally and externally.
Treat it as a combination, not an acquisition.
Wisdom is knowing where you’re strong, where you’re weak, and having the humility to ask for help.
There’s a tendency among acquirers to buy another group because of their “secret sauce” and then immediately set about dismantling everything that made it successful in the first place.
I’ve witnessed that firsthand throughout my career and was determined to avoid that mistake. Rather than treating VelocityFD as an acquisition, we set out to treat it as a combination.
Remember, like most thing in life successful acquisitions are about balance. We wanted to combine our companies, leveraging our respective strengths to eliminate our weaknesses.
The key to a lasting combination is respect. My team and I had to respect the fact that VelocityFD knew the industry better than we ever could. Their approach was different than ours for sure, but that wasn’t a bad thing.
In fact, the combination changed both of our teams for the better. The original BodeTree team became more comfortable with actually selling, and VelocityFD became comfortable offering a more robust suite of services to the brands they represent.
Ultimately, by treating the deal as a combination of two businesses rather than an acquisition, we were able to create a new unified team that was greater than the sum of its original parts.
Remember that Rome wasn’t built in a day.
If we made one mistake in the early days of the combination, it was that we assumed that integration would be a breeze. I know that I initially viewed VelocityFD as a “plug and play” operation, able to immediately thrive in a new environment.
The truth is that there were a few missteps along the way. We hired too quickly, and tried to simply add more resources to the VelocityFD processes under the assumption that “more was more.”
In reality, it takes time to combine organizations. I had to learn from the VelocityFD team and find a way to leverage their strengths in a new and innovative way.
We did this by slowly but surely infusing their proven processes with technology and new ways of thinking. We also took our time integrating the brands, which is why we’re just announcing the combination now.
Good things take time, and nowhere does that hold truer than in the world of business.
How do I know that our approach was the right one? The answer is simple: no one in our organization refers to “us or them” anymore. We’re one team across the board. It took time, but it was worthwhile.
Above all else, remember to be thoughtful.
The combination of BodeTree and VelocityFD was a long time coming, but it has ultimately proven to be the best decision we have made in our history.
With a clear strategy, mutual respect, and a little bit of patience, we’ve created a new powerhouse in an otherwise static industry.
Ultimately, everything came down to thoughtfulness. Everyone involved needed to put in the time, effort, and thought necessary to make this happen the right way.
For fellow entrepreneurs looking to make an acquisition, my advice is simple: be thoughtful and don’t rush. Remember, Rome wasn’t built in a day.