The Expansion Pack

Breaking down acquisition as means to expand your business

The Expansion Pack

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It’s different for every company, but inevitably your business will reach a point where you start to think about expansion. Whether you’re looking to branch into a new state or trying to increase your market share in your current territory, it’s a big step and will be a lot of work. 

In some ways, buying another company seems like the easiest route to expansion. You are removing a competitor from the market. You are instantly acquiring trucks, portables and other equipment. The icing on the cake is all of the new customers you are potentially bringing on. But it is not as easy as it sounds.

The first step is finding someone to buy. There are ads at the back of PRO Magazine each month and you also can hear a lot by word of mouth. I get a ton of industry news just by talking to some of our vendors. They know everything and have seen everything out there. That is a great place to start.

After you find your potential purchase, you have to vet the company you are interested in acquiring. This requires looking at equipment, valuing the trucks, considering the customer list and so much more. In some purchases, the equipment isn’t worth the sale but the customer list has a couple gems in it that make the whole deal worth it. In other cases, the customer list is OK but this acquisition will finally push you into a new territory. The value is really in what you need at that time. For us, every purchase has been really different.

As you get further into the deal, you will see that the hard part of the vetting process is that no one will let you see everything up front. So you are going into a portion of the deal blind. And it is incredibly disappointing to get well into the process and realize that what they said they have and what they really have don’t match. This is where it comes down to negotiation, a little bit of begging, and a whole lot of waiting at times.

In every deal that we have ever made, and we have acquired quite a few companies in our time, there was always some good and some bad. For example, in one purchase the entire customer list was handwritten on paper, boxes, and boxes of paper. After many pain-staking hours we were able to get all of their information into our systems but it was a long and agonizing process. In another purchase, we were almost at the finish when we realized that all the equipment and the trucks were in such bad condition that we had to walk away from the deal.

The most important piece of advice I can give is to keep the process friendly at all times. No one sells a company and then just walks away. You want a smooth transition on both sides so that you are able to keep customers and keep employees if you want to. Keeping the previous owner or their management on for a period of time will ensure the process is seamless. This only happens when everyone walks away happy. 

About the author: Alexandra Townsend is co-owner of A Royal Flush, based in Philadelphia.


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