SaaS Tech in focus: Empowered and OrderWork
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We spoke with James Anderton, CEO of Empowered and OrderWork, about the challenges of business acquisitions and balancing priorities…
How do you evaluate which opportunities are a risk worth taking?
The evaluation check point for me is the ability to challenge yourself honestly between what are you going to gain to what you could potentially lose. As the majority of acquisitions are not deemed successful, logically consideration should be made about the potential of the loss as much as the heroic gain. Loss not just in financial terms, but also in defocus from the business vehicle that you are already driving, the diversion of time, effort and funds away from the entity that you know best, to the opportunity you know less about.
The risk in acquiring any businesses is often the fact that you are not 100% sure of everything you are about to take responsibility for or how, played out in real time, it will integrate post purchase. We have done a few acquisitions with varying degrees of success, but we have definitely learnt some lessons along the way.
At its core, establishing the reason for wanting to make the acquisition in the first place is a good start. Why is it a good fit, what advantage, progression or purpose does it actually make, or is it just going to be a distraction? You need to test each acquisition to see that it really aligns to the overall business aspirations.
It is easy to get caught up in the emotional element of the art of the possible, when perhaps you should be considering more of the reality of the fit. Like clothes, fit is key, just because it looks good on someone else does not mean it will look good on you.
Industry: Information Technology & Services
HQ: Dunstable, Bedfordshire
Ownership: Privately Held
Size: 51-200 employees
Sub-sector: IT Consultancy & Integreation
Establishing some true anchor points of certain truth early in the transaction and understanding the affects of cognitive bias, as well as evaluating new information is so important. As the inbound information changes, you can change your mind.
It lessens the impact on your time and finances to leave the wrong deal early, rather than ploughing on. Doing the deal can be the easy part - making it work and making it meaningful can be a considerably bigger challenge. Why does every sellers future growth plan show a mega multiple from their actual last few years of trading performance?
Initially you get hooked on the dream, a glistening virtual sweetie shop window, however you only get to see what is lurking in the basement later down the process. Therefore, fundamental to any of our acquisitions is due diligence and a very, very inquisitive mind that does not stop at the first response back from the seller.
There are plenty of “potential sellers” out that that will sap your time, however if you do progress to a purchase then you have to have the energy and resources (time, finances and people) to get you all the way through the journey, I think of it as “enough fuel to land the plane, not just to get it airborne”. Not only to the point of acquisition, but also through the first phases of integration before you can start to consider reaping any benefits.
When making the final go/no go decision it is important to take the emotion and excitement out of the chase to just to close purchase. For entrepreneurs making acquisitions rather than perhaps corporate bodies, the thrill is often in the opportunity and the reinvigorating sense of a new opportunities and stepping away from what can seem more mundane and repetitive activities of operating a business, back to the roots of starting one. This light can be a tantalising distraction.
You need to make sure your time is focused on what is truly important to attain your vision. Money can be recovered when given time, but time cannot be recovered given money.
How do you balance the priorities of an existing business and the acquisition of new businesses?
"Ready, aim, fire. Be prepared, this is going to chew up a whole load of time."
Fundamentally it is about having a good team in place that you trust to caretake the business during the process and post event. You have to evaluate if your business is in the right place for change and how easy will it be to adapt, is the timing right?
The more that any impact of something going wrong would affect the part of your business that is going right the more you have to quickly and deeply immerse yourself in the new to understand what the priorities are required.
Clear communication of the vision to all parties is paramount otherwise the workload will not be evenly distributed. The leadership team need clear responsibilities and share the vision with the old and the new
Be as transparent as is practically possible, wherever you can.
What problems should business owners be aware of when making acquisitions?
Take careful aim before pulling the trigger – is this the real target you want to hit?
There are so many aspects that can go wrong, however the key mistakes we made in a number of acquisitions were the problems that we encountered when buying small organisations and not anticipating correctly the effect of the competing cultures that each acquisition would bring.
Things are fundamentally different and critically and rapidly change when you buy a small company of the “mom and pop” type, with employees that have been hired by the original business owner, with a tight vision and a small nucleus of people who have all bought in to the owners vision.
When a larger organisation buys that smaller company with the aim of integrating it into standard operational efficiencies, it runs the risk of breaking down that connection between management and the rest of the workforce, the essence of the old can be quickly removed.
You can decide as a business owner to spend a lot of time and effort in re-establishing those connections, or you can choose to put the cultural fit on the backburner, focusing on other issues that come to light once you have purchased the business. We initially prioritised retaining staff, which was difficult, but we made a commitment to ourselves in senior management that we were not going to lose good people.
Again, making an unemotional decision is important, sometimes people have to go, not everyone fits the new and you run the risk of disruptive elements at a time you need unity. Our commitment to retention meant that we were less agile when the company needed to pivot to meet new challenges. We have learnt that the commitment to the logical sense of strategic decisions is vital.
How do you approach the management of your team?
It is imperative to keep your team engaged. Communication and transparency are key. You must be as open and honest with them as much as is “business practical”.
In any fluid business situation there are always times when some subject matters are inappropriate to talk about, but as a leader you have to find a way about talking about the tough topics. You should be as transparent as you can with staff - tell them what is going on and how it will affect them, empathy and support is a vital ingredient. You need to give them the vision of where things are going in future. At the end of the day you are excited about the acquisition, show them why they should be as well.
What advice would you give others in your position?
We are optimists, we are entrepreneurs, we are business developers. Therefore in any situation, with any problem that we find ourselves facing, we believe that we have the tools and the ability to beat the odds and strategise ourselves out of our compromised position. The reality with the unstoppable force and the immoveable object is that you are going to struggle to win, you need to sense check, take a deep breath, and sometimes make some tough decisions.
You need to find that mechanism of fast-failing and then adapting, cutting off the bits that are fundamentally not going to work, and adapting your own skillsets and having a team that have complementary skills whose advice you trust. We have learnt this over time, and we are much better at it now.
When we look at the current world situation, we were much better prepared for the COVID-19 fallout because of lessons we learned three or four years ago by taking this quick, adaptive approach.
All of this said, if you get it right and navigate the potholes along the journey, the destination view is well worth the time, effort and investment.
Get in touch
Are you looking to make business acquisitions in the tech sector and would like further advice? Contact our local teams for insight and advice at [email protected].
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