22 Nov Building a Platform Business
Back in 2001 and 2002, when the Enron scandal was revealed, Author Andersen, one of the big five accounting firms surrendered its licenses to practice as CPA. Around that same time PWC, Ernst and Young, and a few other large accounting firms sold off the management consulting division of their businesses. Part of the terms at the time the divisions were sold off was a long-term non-compete agreement. Just a few years back the non-compete expired and each of the accounting firms started building the consulting arm back out again. During that time Ernst & Young started acquiring mid and large-sized consulting firms by the numbers.
One might ask how they were able to acquire so many firms all at once without becoming top-heavy and losing strength in the organization. The answer is simple, EY had already built a business platform that was a strong enough to allow them to acquire additional businesses and integrate them into the existing model. Once you are able to once you are able to build a structure that works and provide a dynamic team that can deal with and implement change, then you can start a phase of rapid expansion that allows your businesses to grow organically in addition to acquisition expansion.
A few points that I think are key to building a dynamic business platform that will allow you to begin making multiple strategic acquisitions
- Incorporating a unique business model that is set in motion by a vision of what the business can become. This allows the managers of the acquisition to come together in a single purpose; it also shows the acquirer to grasp who needs to stay on board and who needs to go.
- Having the right people on board is the next key point. I am not talking about the people brought in through the acquisition; I am referring to the existing management team in the acquirer. If the business has a strong CEO who and cope with and handle the change and responsibility the business will be successful.
- Finding the right companies to acquire. There are many businesses that all have their own vision and business pursuits. If one business model does not quite fit, even though it might be a good deal with motivated sellers, it might be a better idea to let it go. It is also important to find a business that adds value in some way, shape or form.
I once encountered a business owner who wanted to pursue strategic growth, but he was unwilling to put the effort into the search that would bring the right companies to the table. It is one thing to have a desire to make an acquisition, it is another to take control and find the companies that will fit into your existing model.
Clients often engage Deal Capital as business brokers for acquisition growth. We will help you identify the right companies and do the heavy lifting in bringing them to the negotiation table.