MERGER MANIA

The ins and outs of M&As

Ottawa Business Journal - Techopia - - Front Page -

Chris Mor­ri­son knows merg­ers and ac­qui­si­tions from both sides of the ta­ble – buyer and takeover tar­get.

The pres­i­dent of Ottawa-based Me­di­aMiser, which cre­ates soft­ware and pro­vides ser­vices re­lated to me­dia mon­i­tor­ing and anal­y­sis, played an ac­tive role in the ac­qui­si­tion of Agility from PR Newswire last month.

The pur­chase al­lows Me­di­aMiser to add 1,500 for­mer Agility cus­tomers, 50 em­ploy­ees and an­nual rev­enues in the $5-mil­lion range.

Over the years, Me­di­aMiser has been part of four ac­qui­si­tions, in­clud­ing its own pur­chase by Inn­o­data.

Here is an edited in­ter­view with Mor­ri­son.

TECHOPIA:

From a Me­di­aMiser per­spec­tive, what is the pur­pose of M&A ac­tiv­ity?

MOR­RI­SON:

One of the most dif­fi­cult things a com­pany faces is ac­quir­ing new cus­tomers. Usu­ally, this hap­pens through ei­ther or­ganic growth or ac­qui­si­tions. While M&A ac­tiv­ity must align with the over­all goals of the or­ga­ni­za­tion and fill gaps in prod­ucts and ser­vices, of­ten the end re­sult is ac­quir­ing a sig­nif­i­cant group of new cus­tomers or the abil­ity to sell more ef­fi­ciently into the mar­ket­place.

At Me­di­aMiser, we’ve now been a part of four ac­qui­si­tions (in­clud­ing be­ing ac­quired our­selves in 2014), and each had their own spe­cific pur­pose – of­ten fill­ing a tech­nol­ogy or ex­pe­ri­ence gap – but no mat­ter the rea­sons, they all must sup­port the growth of your com­pany. But the de­ci­sion also can’t take place in a bub­ble. You need to ac­count for ac­tiv­ity in your mar­ket­place driven by your com­peti­tors, as well.

Our in­dus­try – PR so­lu­tions for track­ing and an­a­lyz­ing news – is un­der­go­ing sig­nif­i­cant con­sol­i­da­tion, and there has been a breath­tak­ing amount of ac­qui­si­tions by some of the larger play­ers (most no­tably Ci­sion). When a larger player starts a “land grab” for mar­ket share, there are both threats and op­por­tu­ni­ties that be­come avail­able to oth­ers. Our most re­cent ac­qui­si­tion of Agility from PR Newswire was a di­rect re­sult of this con­sol­i­da­tion and rep­re­sented an op­por­tu­nity to dou­ble the size of our com­pany overnight, add new prod­ucts, and bring tal­ented pro­fes­sion­als into the fold – a rare triple play.

The threat was if we were un­suc­cess­ful in our bid to ac­quire Agility, it would have been bought by an­other com­peti­tor, which would in turn make it more dif­fi­cult to achieve our goals.

TECHOPIA:

How do you make the ap­proach? How do you iden­tify an M&A tar­get?

MOR­RI­SON:

There’s no sin­gu­lar ap­proach. All four of our ac­qui­si­tions have had completely dif­fer­ent ori­gins and ap­proaches, but do have one thing in com­mon: tim­ing. When we ac­quired Gatineau-based In­fog­lut­ton in 2012, it was as sim­ple as hav­ing met the founders at an Ottawa net­work­ing event and not­ing that both firms could ben­e­fit by work­ing to­gether in the fu­ture. In my ex­pe­ri­ence, at least so far, the con­ver­sa­tion al­ways starts by get­ting to know the com­pany founders and keep­ing ev­ery­one open to the idea that while you may be com­peti­tors now, you could achieve even more suc­cess by work­ing to­gether.

TECHOPIA:

Any point­ers on man­ag­ing what must be very com­pli­cated and del­i­cate con­ver­sa­tions, par­tic­u­larly val­u­a­tion?

MOR­RI­SON:

While val­u­a­tion can be the sin­gle most de­bated topic on both sides of a deal, the re­al­ity is that most deals are driven by pre­vi­ous M&A ac­tiv­ity in your in­dus­try. In­vest­ment banks and M&A ad­vis­ers track and pub­lish ac­tiv­ity by sec­tor, and in­clude in­for­ma­tion on trans­ac­tion val­ues and the mul­ti­ple paid on rev­enues or prof­its. There are al­ways out­liers like Mi­crosoft’s $26B ac­qui­si­tion of Linkedin (a whop­ping 91 times earn­ings), but re­al­is­ti­cally most deals fall within a doc­u­mented for­mula that can be re­searched from the out­set.

For any en­tre­pre­neur, I would highly rec­om­mend a book by Van­cou­ver-based M&A ad­vi­sor Basil Peters ti­tled Early Ex­its. It’s a fas­ci­nat­ing look into the M&A world from some­one who was first an en­tre­pre­neur, then a ven­ture cap­i­tal­ist, and now an M&A ad­viser.

TECHOPIA:

How about point­ers on bring­ing the deal to a close and deal­ing with all the last-minute le­gal niceties?

MOR­RI­SON:

These are some of the most valu­able lessons I’ve learned in M&A, and you al­most have to go through the process your­self to fully un­der­stand it. It’s def­i­nitely a case of ex­pect the un­ex­pected. But the most poignant ad­vice we re­ceived, ad­vice that has rang true in all our M&A ac­tiv­ity, was given to me by our in­vest­ment banker at San Diego-based Soft­ware Equity Group: “A deal is never done un­til it al­most falls apart.”

It’s a very com­pli­cated process that of course re­quires strong le­gal rep­re­sen­ta­tion, but maybe even more im­por­tantly, open lines of com­mu­ni­ca­tion be­tween all par­ties to deal with in­evitable last-minute (and of­ten crit­i­cal, make-or-break) is­sues.

TECHOPIA:

And what about post­trans­ac­tion? Ev­ery­one thinks it’s go­ing to be a dream world, but it must be fraught with pit­falls.

MOR­RI­SON:

Har­vard Busi­ness Re­view es­ti­mates that over 70 per cent of all ac­qui­si­tions fail. Some of the big­gest com­pa­nies in the world have made huge mis­takes, but we’ve been for­tu­nate so far with ours. It may sound sen­ti­men­tal, but at the end of the day it’s all about peo­ple. This is true of both new em­ploy­ees and cus­tomers you’ve ac­quired.

As we speak I’m at LaGuardia Air­port, head­ing back home af­ter a four-day, off-site plan­ning ses­sion with our new lead­er­ship team from Agility. Be­ing able to sit down in per­son and dis­cuss their con­cerns, the fu­ture, and how we’re go­ing to ef­fec­tively work to­gether and win the mar­ket is crit­i­cal.

PHOTO SUPPLIED

ME­DI­AMISER PRES­I­DENT CHRIS MOR­RI­SON HAS BEEN THROUGH HIS SHARE OF MERG­ERS AND AC­QUI­SI­TIONS.

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