Grow by Acquisition / Buy Side
Challenge: Despite having above-average growth and earning margins, a regional PC reseller and systems integrator needed to make a critical decision: What role would it play in an environment rife with consolidation: Acquirer or target?
Solution: Big Change leaders helped the PC reseller and systems integrator analyze its position and arrive at the decision to leverage its strong balance sheet and grow through acquisitions.
Plan: From there, we developed a plan for growth and for acquiring additional skill sets and offerings.
We performed an in-depth overview of target markets and target companies, along with an analysis of their recent M&A activity and valuations associated with each transaction.
We developed a transition process to merge target companies into the reseller’s existing operations. Pre- and post-closing checklists with more than 200 items were designed that the reseller could use for any buy-side transaction.
The plan outlined the PC reseller and systems integrator’s investment commitment and the impact on its balance sheet and bottom line, detailing key metrics such as:
- Total pay-back
- Multiplies of EBIT/DA
- Accretion/dilution analysis
Deal Structure: Deals were designed to be consistent across various transactions, creating efficiencies and reducing red tape and risk. All deals involved a combination of
- Cash at closing
- Seller paper (note)
- Employment agreements for key personnel
- Earn-outs based on future performance
Results: Using the strategy developed by Big Change leaders, the PC reseller and systems integrator was able to evaluate more than 75 companies every year, making an average of three acquisitions every year over 10 years.
The growth through acquisition strategy drove earnings and revenue over 45% (compounded annually) and two stock splits. All acquisitions were fully integrated and accretive to company earnings, meeting or exceeding Wall Street expectations for four consecutive years.
Synergies were achieved in every transaction. All acquisitions had a positive impact on the reseller, and were structured as “win-wins” for both the reseller and each target company.