What Factors Lead to a Successful Acquisition?

The pandemic has placed some business owners at a crossroads as to whether they should sell off to larger entities in 2021. By almost any measure, the mergers and acquisition market is set to rebound this year, but with that reset there are several factors to consider when it comes to selling out to distributors.
M&A Summit distributor panel screen shot

During last week’s MDM M&A Virtual Summit, several distributor panelists discussed what factors they valued the most when it comes to mergers and acquisitions. In order to drill down on more relevant insights, the panelists in the “What Makes a Successful Deal?” session represented a private equity-backed distributor, a privately held distributor and a publicly traded distributor.

Each panelist explained how their respective companies approached their M&A deals.

The public perspective

Greg Cook, executive vice president and CFO for publicly traded Motion, said his company was a serial acquirer of other companies, and it managed to buy three companies in August of last year. “The vast majority of our deal sourcing is just that relational kind of connection building that we can go out and hunt in the categories that we’re interested in,” Cook said. “Whether that’s industrial, whether that’s automation, whether that’s other kinds of solutions, we’re building those relationships. I would say our process for finding targets is highly pipeline-relationship-building oriented. We’re not afraid to do the cold calls. We look at all the available data. We can build the profiles about a company, and we make those cold calls.

“I think it really comes down to being candid and sincere because sellers can get spooked by a cold call. ‘Why are you calling me? Who told you to call me?’ Really, it’s just working through the sincerity and honesty that we would just like to get to know you. One of these days, you may want to have an exit strategy and we’d like to be the name you think of.”

The PE perspective

Celeste Mastin, CEO of PetroChoice Lubrication Solutions, which is private equity-backed by Golden Gate Capital, said her company’s focused on getting the platform ready to receive acquisitions. “Over the course of the last couple of years, we’ve actually moved to a more hybrid model, whereby we’ve consolidated all of our indirect functions — dispatch, inventory procurement, customer service, billing — all of these sorts of things we’ve consolidated into our headquarter location,” she said. “That, plus adding technology to those functions has enabled us to really prepare ourselves to generate outsized synergies when we acquire other companies, whether they’re two branch acquisitions or 20 branch acquisitions, we will consolidate their indirect activities into our headquarters.

“For us, really, we do a lot of our own sourcing of acquisitions, and over the course of the last two years, again, our focus has really been on preparing the platform to receive acquisitions.”

The private perspective

Monte Salsman, the president of the Winsupply Acquisitions Group for privately held Winsupply Inc., said his company’s acquisition strategy was based on having an ownership team under every single representative roof.

“We had a group of people that believed that was the American Dream, to give people equity in a business, and that has carried us through,” he said. “We think that’s the best solution for customers because they get empowered people who are highly motivated to serve them with nobody from corporate ever giving them any kind of answer or direction on how they can take care of their customers.

“It’s an incredible business model for sellers because they can get a transaction. They can actually stay in if they want to and have ownership and diversify. We’ve got, we think, the only platform like ours in the entire industry, and it’s a very unique way to think about transitioning your business.”

For much more from this session, including details on what buyers want from sellers, be sure to read the full recap in the March 25 issue of Premium. Can’t wait? Sign up to view this and all of our M&A Summit sessions on demand.

Correction: A previous version of this article incorrectly stated the ownership structures of PetroChoice Lubrication Solutions and Winsupply Inc. MDM regrets the errors.

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