Acquisition – Deal or No Deal?
When is the right time to buy and sell? Product Media got some advice from a merchandise dealmaker
Buying or selling a business are two sides of the same coin. For every business-person looking to sell their company, there is somebody else considering expanding through acquisition. In a dynamic market like promotional merchandise, this is especially true. Recent years have seen something of a consolidation of players, with bigger companies claiming a bigger slice of the total merchandise pie.
During the past two years, one of the most active acquirers of companies has been GeigerBTC, a company that was itself formed following the acquisition of Hayesbased BTC by American company Geiger. In the past 18 months, the company has done four deals, growing from a team of 52 to 90, and is not finished yet. Managing director, Frank Murphy, spoke to Product Media about his approach.
What is it like to have been on both sides of a deal?
It’s been a very interesting time since we were acquired by Geiger in May 2018. Being on both sides of the processes of being acquired and going on to acquire companies myself has given me a fascinating insight into how other business owners operate and how they view the future both for themselves and their employees.
Is the move to larger distributors behind the buying spree?
The growth of international companies demanding a one-stop, global, solution for promotional merchandise and clothing has meant that large distributors, especially in the US, have had to either set up operations from scratch or acquire established businesses in new markets. Once they have become established in a new market it is only natural that they want to expand their share and acquisitions are a tried and trusted method. Many owners come to the conclusion that as their businesses have grown, they spend all their time on HR and finance and very little on doing what they do best, which is working with clients.
Why did you sell BTC Group?
By 2018, BTC had reached a point where we were still growing in the UK, but in order to compete for major, international contracts, we needed to be part of a global company. It. was definitely the correct decision which has been borne out by our growth in the past 18 months.
What are the merits of acquisition as opposed to organic growth?
Acquiring the right business not only brings immediate financial growth but more importantly it brings an injection of new faces, fresh ideas, enthusiasm, improved geographical location and access to new markets. Organic growth is still very important, however.
What’s your approach to a deal?
The number one consideration is whether the owners of the potential acquisition are Geiger type people – would they fit in with the way we do business? Geiger has a simple philosophy which is to ‘do the right thing’ and that applies to how it deals with colleagues, clients and suppliers. The second most important consideration is that the business is trading profitably. We do not acquire businesses that are in debt or that have gone into liquidation.
How do you find businesses to buy?
We’ve acquired four businesses over the past 13 months and I’ve spoken to probably another 10-15 owners during that time. In each case I’ve been approached by the company directly or via a third party in the industry. We’ve established a reputation for honesty and integrity so people feel safe approaching me as they know the conversation will remain confidential. In 2020 we will begin to be more proactive by advertising our desire to open discussions with any potential partners.
What will make or break a deal?
A good deal has to work for both sides and that requires a solid dose of realism when it comes to valuations. Geiger needs to be able to make a profit and the sellers of their businesses need to feel that they have been rewarded for building a successful business. I’ve enjoyed meeting and talking to many really interesting people during this process. In every case, we have concluded our discussions with a handshake and an agreement to stay in touch whether we decide to do business or not.
What are the toughest aspects of doing a deal?
The process of due diligence can be arduous. However, if both parties are totally committed it can be completed in 4-6 weeks or less, as long as everyone is open, honest and realistic.
What advice would you give to a company looking to buy or sell?
Do all you can to ensure you can really work with the owners of the business. After that it’s essential to carry out full due diligence and don’t be blindsided by wanting to close the deal. Once you’ve signed on the dotted line you are immediately responsible for the new business.
Sellers should ask if it is really what you want to do. If so, then be realistic about what the business is worth today and not what you think it may be worth in years ahead. If possible, talk to others who have been acquired by this company, talk to suppliers and others in the industry to learn all you can about them.