As the consolidation of the A/E industry continues to pick-up steam, smaller and smaller firms are looking to become acquirers. Where just a few years ago, growth by acquisition was a strategy almost exclusive to the ENR Top 200, today there are many potential buyers with less than $10M in revenue in the marketplace.
However, pursuing a growth by acquisition strategy and being truly successful at it are two entirely different things.
Regardless of size, one of the biggest issues we see holding back first time buyers is lack of patience. This impatience can manifest itself in several ways.
Even buyers that have done the proper amount of market research prior to launching the acquisition process can have trouble finding the right seller.
While being very specific in describing the kind of firm you want to acquire is usually a very good thing, expecting to find exactly that firm can be frustrating.
That frustration can be multiplied when you find a match but they aren’t looking to sell and will only take you seriously if you show up driving a Brinks truck.
Buyers can relieve this stress by clearly defining which aspects of their “perfect match” are crucial and which are optional, and then having the patience to look around and talk to several firms that meet the crucial criteria, but also have varying degrees of optional attributes.
Talking to several potential sellers, and letting all of them know that you are talking to several firms, takes more time, but also greatly increases the chances the your firm will indeed grow by acquisition.
Many buyers grow impatient with the amount of incubation time needed for potential deals to move forward once a good match has been found. Remember, as a buyer, you’ve had time and dedicated some effort to getting ready. The sellers have usually had no such opportunity.
In order to respond to the buyers’ requests for meetings and exchange of information, sellers must be reactiveand carve out time in their already busy schedules. In some cases, buyers find that the concept of selling was attractive to the sellers but that the process of selling is so overwhelming that the sellers simply push away from the discussions.
Buyers that take intentional actions to keep the process from being so overwhelming must have patience to put themselves in the sellers’ position, but in doing so give themselves an opportunity to acquire a firm that otherwise could decide to walk away due to lack of available time.
The final area where patience is needed is probably the most sensitive of all. Buyers have to realize that the advisors picked by most sellers will have been chosen because of long-term relationships and not because of significant, relevant M&A experience.
If it appears to a buyer that decisions that were made months or weeks ago are being questioned again late in the M&A process because of concerns raised by the sellers’ advisors, the buyer really has no choice but to be patient and work through the details again (and again, if needed).
This issue can be alleviated to some extent by suggesting or coaching the seller on the proper role of the advisors and when they are needed.
But buyers also have to recognize that there can be a conflict of interest on the seller side where their advisors are not as enthusiastic about losing a client as you are about making an acquisition.