What I’ve Learned From Buying 8 Companies in 13 Years

Which companies are on your shopping list?

Some entrepreneurs like building their own business infrastructure, but I like to go out and buy it. I don’t want to start from scratch when someone else has already created a working business model supported by high-value resources and proven cash flow. But no company is perfect — to buy a company is to inherit a set of problems on their way to becoming a solution.

Business acquisition deal

Acquisitions are expensive and time-consuming, but they grant business leaders access to a new pool of resources to more fully achieve their vision.

Between 2000 and 2013, I bought eight companies and assembled a vibrant, harmonious portfolio. I’ve ridden the acquisition rollercoaster across multiple industries and learned a lot along the way. Here are five big lessons I’ve taken away from navigating these complicated but rewarding waters.

Only do business with a bank where you can take the CEO out for lunch

If you have a bank financing your acquisition, prepare for frustration. They may be reasonable and understanding in one moment, then change gears to ask you the same question three different ways. Then they’ll dig deep and request financial records from 30 years ago, on top of more interrogations into your financial health. There is a Jekyll and Hyde comparison to be made here.

In other words, you should work with small and medium-sized local banks because they are usually the most nimble within regulations. Big banks can’t think themselves out of a bag, and unless you’re Bill Gates, they don’t really care if they work with you or not. Their lack of empathy and stagnant approaches won’t help you thrive. Be strategic when dealing with banks, or else they will drive you crazy.

Consolidation is king

Why buy one company when you can buy two? Hell, shut one of them down and move the revenue into the other. This tactic drives profits and revenues very quickly, and it eases the operational burdens of an underperforming company at the same time. Consolidating multiple companies gives you a strong starting point to build a great company with healthy revenues. Entrepreneurship calls for boldness, and this is a strong way to assert yourself as a business owner.

Acquisitions always take longer than anticipated

Lawyers are central to the business world, but they slow down all business processes while simultaneously making them more expensive. They aren’t bad people — some of my good friends are lawyers — but they charge high hourly rates for every imaginable thing, and it adds up quickly. They’re entirely thorough in their research so that your acquisitions are legal and compliant, but it comes at the expense of time and money.

If you deliver data to your legal team in an organized fashion, these expensive delays will take no longer than necessary.

Healthy business environment with happy employees

Move quickly during the integration process

Nothing scares employees quite like seeing their company under new ownership and management. That’s why transparency is especially crucial during the integration process. Whatever you decide to do with your newly acquired business, you ought to communicate your plans clearly and execute them quickly.

If there’s going to be layoffs, then say so. If you’re going to sell off business units, don’t let it be a surprise. You would typically pull a Band-Aid off in one swift motion to make it less painful, and the same approach applies here. Tell people what you’re going to do, then do it right away. This lets you maintain clear control of the integration process. Your employees will learn where they stand and what they have to do within the company to reach your goals.

Get rid of as many middle managers as possible

Streamlining is the name of the game with any new acquisition. If you buy a company directly from its former operators, odds are strong that it’s full of legacy managers who no longer drive value. These people won’t survive in your new corporate culture, so take this opportunity to flatten out the organization.

More often than not, you’ll find the people on the lowest rungs of the corporate ladder do most of the work. Middle managers are only along for the ride. Keep the people who prove that they drive value in their area and say goodbye to those merely supervising the underlings.

To bring it all together, I’ll remind you that no company is perfect, but thoughtfully combining businesses can make your own company better. You should be prepared for an acquisition to take much longer than expected. Banks and lawyers are there to help you, but don’t let them walk all over you. And once you’ve acquired a business, you should communicate your plans clearly, execute them quickly, and get rid of employees who are coasting.

These are the guidelines that steer me as I continue to scratch businesses off my shopping list. I hope you’ll put them to work for yourself.

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