Mergers and acquisitions may be financial transactions, but don’t tell that to the people on the front lines implementing the deals. They face a range of people problems, cultural and legal issues, administrative and other decisions that are as integral to the success of the deal as the numbers. Below are some first person accounts from those who have been instrumental in planning, executing or managing M & A; deals. They will all likely tell you that when it comes to M & A;, one plus one does not always equal two. Shelly Garcia <!– Michael E. Adler –> Michael E. Adler Michael E. Adler President, Managing Director Informa Research Services Informa Research Services, a Calabasas company that provides a variety of competitive intelligence products and services, has been both a buyer and a seller. After an unsuccessful acquisition, the company was acquired by London-based Informa Group, which in 2004 merged with Taylor & Francis Group. In the U.S., Informa has in recent years acquired a number of companies, including Market Trends Inc. and Barry Leeds & Associates. The company we bought that turned into a disaster, was making one percent margin and they thought anything over one percent was greed. We are running a business that makes 23 percent, 24 percent margin, so our na & #271;ve thought process was we can take them over and we can change that and make a lot of money. We bought it with the idea that the owner would stay on. Well, six months later, the owner said to us, ‘You bought my house, you’re changing the drapes and curtains, but I still live here.’ He had imbedded that culture so much into the people that you couldn’t change it. The only recourse was to have him exit the people but we still had a lot of people who just thought more than one percent was greed. And sure enough, our first full year with them, we did $9 million in revenue and $90,000 in profit. They sucked all the money out of everything else we were doing and they hit that one percent goal. Kevin Coop President Interthinx, Agoura Hills This summer, Inter- thinx, a provider of automated fraud protection, compliance and decision support tools for the mortgage industry, based in Agoura Hills, through its parent company ISO, acquired Domus System, an electronic data reporting company in the real estate industry. The acquisition was just one in an aggressive strategy that is yielding an average of one acquisition a month designed to speed an expanded offering of data products to market. In my experience with having to integrate between 15 and 20 companies, you always have challenges related to the entrepreneur that doesn’t like being part of the organization. It’s very difficult to integrate those folks. You’re serving two masters. All the secret sauce that’s made the business, you don’t want to destroy that, but at the same time you have to exert some adult supervision. Ultimately, it will solve itself. Most people think they are more valuable to the organization than they are. You blend the team together, people jockey for position, there’s some infighting, morale suffers. You address it and people eventually will leave. Judi Irving President, CEO HemaCare Corp. HemaCare, a 28-year-old provider of blood products and services to the healthcare industry, in August acquired Teragenix Corp., a $5 million provider of human biological samples and other products and services for the biotech and pharmaceutical industries, creating HemaCare BioScience Inc. The purchase, for about $4.8 million in cash, stock, notes and assumed debt, was designed to expand Woodland Hills-based HemaCare’s business into the research arena, a new sector for the company. The strategy was to retain the former Teragenix management and, at least for the foreseeable future, operate the company as a separate division. We worked with Duff and Phelps to have them assist us with identifying potential targets. It is real important to get someone who understands your business. You save a lot of time. And I think what’s also important is a lot of face-to-face time with the target and with different levels of management. It’s multiple levels (of understanding). One is to understand completely what kind of business you are acquiring, but also it starts the transition even before you have made the acquisition. You know the individuals better and there is more of a working feel. You establish your relationships early on in the process. Mark Powers Senior VP CallSource Earlier this year, Westlake Village-based CallSource, a provider of online call-tracking and recording products that allow companies to measure their advertising investments, acquired Markette Systems, a three-year-old firm that provides similar products with a focus on automotive and marine retailers. The company has primarily grown organically, but considers acquisitions to complement that strategy. Let’s say what you’re delivering to the market is very similar to what you’re buying, you have to migrate either yours or their customers. You have to have a good migration plan. A lot of times it doesn’t work cleanly and it’s a very good way to lose customers. When you’re doing a transaction, it’s hard to uncover every single piece. The devil is in the details. You don’t know until you are doing it. You have to have a team that, when these issues arise, they can fix it and make the integration as seamless as possible. I think we just keep trying to get better and better at the preparation and the integration process. But if you find something good, let me know. J.T. Cecchini Director of Planning and Development J.D. Power and Associates Not long after being acquired itself by McGraw-Hill Cos., J.D. Power and Associates, the Westlake Village based marketing and information services firm, acquired Automotive Resources Asia in China, a similar company specializing in Asia’s car markets. The acquisition was designed to augment an existing operation Power had in place in China and followed a series of more informal relationships Power had maintained with other research companies in the region. China was a key area of interest where an acquisition made sense to increase the speed (of growth there). Because the country is growing so fast and a lot of these agencies are young, there’s not the history to fall back on, so things change quickly, and that applies not only to the economy and the markets, but also the governmental and regulatory agencies. What that means is you have to spend much more time on your legal strategy than you would in other domestic deals. One of the main concerns we have is protecting our intellectual property rights. We have a lot of processes and methodologies we’ve developed and a lot of our approaches for modeling for customer satisfaction. That’s a big concern we have in an emerging market. How do you protect your intellectual property and where are the mechanisms in place to protect you? Neal Vitale CEO, Co-Founder 1105 Media Inc. 1105 Media Inc., a business-to-business publishing company, was formed earlier this year when a partnership including private equity firms Nautic Partners LLC, Alta Communications and publishing veteran Neal Vitale acquired 101communications Inc. in Chatsworth and Stevens Publishing in Dallas. The consolidated company, now with offices across the country, has offerings in print and online magazines, journals and newsletters as well as seminars, conferences and trade shows covering the information technology, industrial health, safety and compliance, environmental and healthcare industries. We collectively and separately have been looking at dozens of media opportunities. I don’t think there’s any great wisdom. You look for cost savings on one hand where you have redundancies so you can make more money by putting them together. On the revenue side, you look to see where businesses may not have been invested in adequately or you see business opportunities that may not have been capitalized on by prior management. These deals took between six and nine months to close. What took us so long was to find the assets we wanted at the price we were comfortable with. You just have to keep balancing those issues. If you think a business is worth X and the marketplace thinks it’s worth more than that, you’re not going to be successful. Mark Louchheim President Bobrick Washroom Equipment Inc. Since 2004, Bobrick Washroom Equipment Inc. has made two acquisitions, buying the public baby-changing station maker Koala Kare Products and a division of Masco Gamco, which, like Bobrick, produces accessories for the non-residential building industry. But the wheels were put in motion far earlier when, in 2001, the company first set about to develop a strategy to expand. We were looking for a way to grow the company if we could do it in a way that would strengthen our company as well as add value. We didn’t go out and say we wanted to buy a company. We have a very active internal management program. We had management we wanted to grow and we wanted to create opportunities for them. The first thing we did is develop a criteria back in 2001. The company had to be in an industry consistent with our mission. Then we had certain things about the market in terms of how concentrated the company was within its particular industry. We wanted capable management; we had specifics about the size of the company and what the impact was going to be on our balance sheet by doing an acquisition. Then in 2002 and 2003 we started to put together a due diligence transition team. We explored what outside consultants we would use and potential investment bankers. Then in 2003 we started to develop a targeted list of companies. When we acquired Masco Gamco, the process was already set up. They were one of the companies on our original list. We have a tendency to talk with the companies where they know us.
