So, you’re a managed services provider (MSP) that’s set to buy or sell a business. Once the details are hammered out and the deal is official, only three words matter: Focus, integration and execution. Plus, it’s critically important for the seller to think of a merger or acquisition as a starting line rather than a finish line. Here’s why.
It’s been one week since Penton Media acquired our company, Nine Lives Media. We’re not an MSP, but we are a small business that encounters many of the day-to-day challenges (and opportunities) that you experience. Amy Katz (co-founder of Nine Lives) and I spent last week at Penton Media’s offices in Fort Collins, Colo. We were impressed.
On the one hand, we’re striving to leverage a range of Penton resources and expertise that we lack. I don’t want to share too much of the integration strategy, but Penton has database and SEO capabilities that should treat MSPmentor and its sister sites really well. In short, Penton’s team is insanely talented, and we’re thrilled to be part of the Penton family.
On the other hand, we’re striving to maintain Nine Lives’ unique culture… which is on display in this FastChat Video:
Three Words to Keep In Mind
For MSPs that are exploring M&A deals, I would offer the following advice: You’re going to spend dozens — perhaps hundreds — of hours working through the negotiating process. In our case, Amy Katz and our financial advisors worked incredibly closely with the Penton team to hammer out a deal. But selling MSPmentor and its sister sites wasn’t an exit or a finish line for us. Instead, it was a starting line for Penton and Nine Lives to work on something pretty exciting together.
Three Words to Keep In Mind
Once you have an M&A deal in place, you need to maintain your laser-like focus on customers even while you work on short-term company integration strategies and long-term execution efforts. Or more specifically:
1. Focus: You must maintain — or potentially boost — your service and support levels as soon as the M&A deal is done. All eyes will be on your company the moment a merger or acquisition is announced. There’s no time to celebrate. Customers will be gravely disappointed if you slip up post-merger. And rivals will be looking to move in and steal your customers.
2. Integration: Before the deal is even announced, you must pinpoint the exact areas of integration that the buyer and seller will need to rapidly address. In our case, there are basic technology integrations (phone systems, email systems, databases, etc.) and strategic business integrations (the sharing of best practices across two companies united).
But DON’T chase every potential integration point. You’ll hear plenty of recommendations. But before you completely blend your company with another company make sure you keep your focus on your customers. A small example: Even as our team starts to use Penton email addresses, we plan to keep our Nine Lives Media email addresses and phone numbers indefinitely, so that established readers and sponsors can always reach us.
3. Execution: When some MSPs seek to sell their companies, that’s the ENTIRE plan (“I want to sell and retire” or “sell and launch something new”). But that’s not really a plan at all. Instead, you need to show the potential buyer your growth plan:
- How is it that you expect to raise EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and revenues over the next few years?
- And what commitments are you willing to make to ensure those goals are met over the long haul?
In other words, the M&A deal isn’t the end of your vision. It’s the start of a new, bolder vision. You need a clear growth plan in place before the M&A deal gets confirmed and announced. And then every decision you make post-M&A needs to map back to the plan. Otherwise, your M&A deal will fail before it ever had a chance to succeed.
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Posted In: Acquisitions | Mergers & Acquisions | Service Level Agreements
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Joe, I thought the 3 were: Approved by shareholders
Stu: You got me. Those are three key words every buyer and seller wants to hear.
-jp
Love the slide! What a fab idea for getting downstairs.
Joe – what a great short video and some great advice on M&A’s. Again, congratulations to you and Amy on starting an exciting new chapter in your lives!
Joe, this is awesome advice and something I try to drill into the heads of sellers (and buyers for that matter). You’re not selling a house. It’s not a quick and dirty process. And you most likely are not walking away immediately with the “brass ring”. Definitely not in a merger situation anyway. It’s truly the next piece in the investment.
A lot goes into a deal. And as the value of the deal gets bigger, it gets more complicated from deal structure to integration to execution. Through it all you need to keep the business thriving or not only will you sink the deal, you may sink your entire ship by neglecting to actually run it in a way that made the deal you are working on a reality in the first place.
You mentioned the time it takes to work through the pieces of the deal. Even the smallest of deals takes considerable time, which removes you from running the business. I’m glad you brought up the fact that you (and I’m sure Penton) had professional help. Most people sell a business once in a lifetime and every deal is different even if you do a lot of M&A. Professional assistance allows business as usual to happen, teaches you what you don’t know about the M&A process and steers you in the right direction on the slew of deal specific decisions that need to be made for a successful transaction and merge. Always well worth the money to get it done right and as fast as possible.
Sounds like you are doing everything the right way and all is going well. Very happy to hear that. I look forward to subsequent posts on how this excellent opportunity is panning out for you and Amy!
George Sierchio
Justin@3: We love the slide, too. Though we hope to spend our time climbing higher instead of sliding lower.
Richard@4: So far so good on the next chapter. But there’s a lot of work to be done. Thrilled to say Penton’s team (IT, sales, marketing) is already showing us some great potential solutions to help us execute on our growth plans.
George@5: I hope all is well. When it comes to Nine Lives hammering out the deal, Amy deserves all the credit. She did all the legwork to ensure we had our ducks in a row. And she also found and worked very closely with our M&A advisors to finalize the deal with Penton. I can’t imagine being a first-time seller without engaging a strong advisor who knows the ins and outs of M&A. -jp
Sounds like you (ok really Amy
) did everything right. It’s a big decision and it seems it’s heading in the right direction. Couldn’t happen to better people. All is well here. Hope to see you again soon.
George: Yes, Amy has a habit of doing everything right while leading our business. But I hide that fact in the comments section of our blogs so that nobody tries to recruit her away from Nine Lives Media and Penton Media.
-jp