The ins and outs of M&As
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.
From a MediaMiser perspective, what is the purpose of M&A activity?
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.
How do you make the approach? How do you identify an M&A target?
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.
Any pointers on managing what must be very complicated and delicate conversations, particularly valuation?
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.
How about pointers on bringing the deal to a close and dealing with all the last-minute legal niceties?
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.
And what about posttransaction? Everyone thinks it’s going to be a dream world, but it must be fraught with pitfalls.
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.
MEDIAMISER PRESIDENT CHRIS MORRISON HAS BEEN THROUGH HIS SHARE OF MERGERS AND ACQUISITIONS.