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An expert’s guide to successful acquisitions

Gerard Keenan By Gerard Keenan,  November 15, 2016

As finance director of same day distribution network, CitySprint, Gerard Keenan has to ensure that acquisitions boost revenue and EBITDA. With now more than 21 successful deals in the past five years, he knows what it takes to buy-and-build.

Dunedin invested in CitySprint six years ago. We’d undertaken four or five acquisitions at that point, but they had been very speculative and we didn’t have a dedicated professional team in place to support them.

When Dunedin came on board we formalised this process and made it a core part of our strategy. We made one of our best commercial people head of acquisitions. They started to mine the databases and trawl data rooms to build up a pipeline. Dunedin also helped through their dedicated research and origination team.

In the first five years of Dunedin’s involvement, we completed 21 acquisitions ranging from turnover of a few hundred thousand pounds to £18 million. We were always mindful that the acquisition programme must supplement the organic programme and not distract or detract. Having a separate M&A team to focus on the acquisitive growth allows the sales team to focus purely on the organic growth.

We’ve built a first class reputation as an active and professional acquirer that will honour the deals that we agree up front and respect the culture of the acquisition business. Many of our acquisitions have been sourced by vendors of businesses we have bought, who in turn are our best references for prospective target companies.

Focus on the bottom line

Why acquire? We've bought for scale, to go into new areas and for service expansion. For example, HBS was a baggage distribution service with operations in Heathrow and Gatwick that has taken us into a new market/segment. You do have to be particularly careful however that service expansions fit into your product offering, your network and that your people understand it.

The key is client retention and maximising the synergies. That seems obvious, but when you do a lot of acquisitions you focus on the up front analysis, the negotiations, the due diligence and the deal itself.

You’ve got to be respectful and make sure that changes for staff, couriers and customers are minimal at the handover have a period of transition after that. The only change we say the customers are going to see is a different invoice. They will still speak to the same people and get the same courier. We make it difficult for customers to leave because everything’s the same and change is incremental.

We focus on incentivising key staff within the target company. Before Dunedin, we bought companies and the vendor did very well, but there were sometimes other key individuals who weren’t initially focused on as much by the business. The risk is that they become disillusioned very quickly and leave. On our journey we have learned that sometimes the key person is the person answering the phone, other times it’s two or three of the couriers. When we're doing our operational DD that’s the sort of thing that we really try and uncover.

Deliver the promised benefits

Synergies are important, but we have learnt to take our time. You could easily descend into chaos and leave customers unhappy. Before Christmas we undertook an acquisition in Bexley. We kept everything the same until after Christmas (peak time) and then moved it into our premises and onto our systems. We achieved a really smooth transition and didn’t lose any customers along the way. There was no disruption and staff were happy. Acquiring businesses is relatively easy; it is the integration that is the vital key to success.  

Know when to back down

You need to ask yourself objectively if an acquisition fits. It may look great and the numbers may stack up, but you’ve got to get underneath it and think about it from an operational point of view. If it doesn’t fit then you have to walk away. It's probably one of the hardest things to do when you’ve invested a lot of time but you’ve got to be able to make that brave decision for the good of the business.

We do a lot of the calling ourselves. We’ve got 41 service centres, run by 41 people, plus a senior management team, including regional managers and a head of M&A. We all go out and talk to customers. If anyone introduces an acquisition, we pay them a percentage of the turnover that gets brought on. It’s an investment that pays off.

I’m proud to say we’re good at acquisitions and we’ve really benefitted from Dunedin’s help through their research team and also the support and confidence they’ve given us to really go out and execute the strategy. We’ve learnt from experience. It sounds simple: find the right target, act with integrity, manage the transition, incentivise everyone, realise the synergies and don’t forget about organic growth. That’s the art of acquiring.

Gerard Keenan is Group CFO of CitySprint.

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