Add-On Acquisition Integration Lessons

Guesswork Unveiled, Issue #2

Add-On Acquisition Integration Lessons

Guesswork Unveiled, Issue #2

Good news — our Operations Manager job posting is live…and I’ve have gotten a handful of interesting applications so far.

I’m struck by the importance of having built out my industry network over the past couple years — high-caliber people want to work for credible companies, and I’m seeing some folks come to us saying they’ve heard of our company before, seen us at industry conferences, etc. It’s nice to see some of that groundwork related to in-industry branding start to pay off.

I’ll provide a further update next week.

This week, I want to tell you about the add-on acquisition I recently completed, my first since the original acquisition. Although I have a ton of acquisition experience from my PE days, this was my first time doing an integration — and well, it showed.

Today’s post goes through lessons learned and will hopefully help you avoid making the same mistakes on your first add-on acquisition.

Roll-Ups as a Strategy

Before getting into lessons learned, I do want to make a quick note on the roll-up strategy as a concept. Frankly, after years in PE, I was pretty sour on the roll-up concept. I’d witnessed the financial engineering that leads to zombie roll-ups that are all about multiple arbitrage. Doing add-on acquisitions was not a core part of my search thesis at all.

I realized more recently that I don’t have to be so all-or-nothing about it. I don’t have to buy every possible add-on opportunity with a pulse. I can choose to be strategic, slow, and careful.

Frankly, I’m more skilled at acquisitions than I am at day-to-day operations — growing inorganically is actually playing to my strengths. I can actually exercise my investment judgement, a skill I’ve spent years honing.

In other words, my initial hesitation around add-on acquisitions was an over-rotation away from PE — instead, I am now opting to be a thoughtful strategic acquirer.

This first add-on acquisition meets the bill — a high-quality competitor, strong revenue mix, run the right way, featuring good people & great clients. The sellers were great to work with, and we arrived at a fair acquisition price & deal structure. And so we did the deal and the company is better for it.

Now, onto lessons learned!

Integration Pacing

Frankly, the hardest element of integration was figuring out the pacing on making changes. Take too long to integrate, and the integration process feels interminable. Move too quickly, and you can put your whole company into shock from the amount of change the team has to stomach.

My initial plan had been very similar to the original acquisition — limited changes for the first 90 days, as I learn how the business works. In hindsight, an add-on acquisition has to move at a faster pace than the original acquisition.

Why?