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5 tips for finding the right acquisition

When Bill Berrien closed on the acquisition of A.S. Pindel Corporation in August 2012, he realized a long-held ambition of buying and operating his own company. But even for a buyer like Berrien, who had a thoroughly planned and organized acquisition strategy, the search process required diligence, patience and determination.

Bill Berrien assessed 120 companies over the course of two years.

Berrien was a first-time business buyer when he purchased A.S. Pindel, a manufacturer of custom, precision-machined components located in New Berlin, Wisconsin. In his initial search, he assessed 120 companies. He then honed his search to 30 to 40 companies and became a contender for six of them. Through a two-year search, he settled on one – A.S. Pindel. His efforts included cultivating a relationship with former A.S. Pindel owner, Marc Pindel. Here is Berrien’s take on the process and lessons learned.

Lesson 1: Set personal acquisition goals. Berrien recommends would-be buyers decide what they want and don’t want, and frame their priorities. For Berrien, what drove him was the need to purchase a company he would enjoy being heavily involved in for years to come.

Lesson 2: Be as specific as you can. To be considered a valid potential buyer, Berrien’s advice is to be as detailed as possible in your search criteria. Berrien pointed out that details help keep a potential buyer top-of-mind with the owner and differentiate you in a market with far more buyers than sellers.

Berrien specified the following criteria for his search:

  • An established business located within an hour or two of Milwaukee
  • Revenue of $5-20 million and EBITDA of $3 million or less
  • Low-tech and straightforward operations
  • Tangible opportunities for growth and operations improvements
  • Leverage-able assets and cash flow
  • Controlling ownership interest
  • A strong company with an experienced owner in need of an external succession plan

Lesson 3: Build a diverse and interested group of advisors. Berrien stressed the critical need to develop mentors early on. He suggests that team consist of people in diverse professional services. This includes advisors who are removed from the process, but who have their own experience in the buying process. An advisory team not only acts as a valuable source of knowledge, but it can also serve as a source of opportunities and referrals. According to Berrien, it’s essential to finding opportunities.

According to Berrien, an advisory team is essential to identifying the right opportunities.

“I had an interested group of advisors, all of whom had credibility and the ability to offer insight, opinions, and to mentor me in some of these processes. Only a few of them were actually going to be compensated in the transaction in the end,” Berrien said, describing his advisory team. The composition of Berrien’s advisory team included lawyers, accountants and banking partners in addition to personal mentors.

Lesson 4: Relationships are absolutely essential. Berrien cannot overstress the importance of forming business relationships and networking throughout the local business community. In his search, Berrien became heavily involved in a number of groups including the Association for Corporate Growth, the Turnaround Management Association and Midwest Business Brokers and Intermediaries.

Berrien cannot over-stress the importance of forming relationships and networking throughout the local business community.

Lesson 5: Work with a locally-connected bank. Berrien underscored the important role a bank can play as a matchmaker to align potential buyers with sellers. He noted that banks constantly have eyes and ears on the market, and suggested that a bank focused on a concentrated region can be especially valuable as a “quarterback” that helps guide a buyer toward the right opportunities and the right non-banking professionals to be involved in the process.

A bank that is focused on a concentrated region can be especially valuable as “quarterback.”

Getting started

The search process takes months or even years to lead to an acquisition. Because of this, it’s vital to have clear goals and a solid acquisition strategy with defined criteria and a team to support the process all along the way. For those looking to buy a business, it’s never too soon to start building connections.

 

Bill_linkedinBill Berrien is CEO of A.S. Pindel Corporation. Prior to acquiring A.S. Pindel, Berrien held leadership roles with GE Healthcare and Liberty Dialysis LLC, a Bain Capital and Ignition Partners portfolio company.