4 Keys To Maximizing the Value of a Potential Bolt-On Acquisition

Chief Executive Officer

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Guest: Luc Stang, the President and CEO of Gincor Group, which is the parent company of Canada’s premier provider of vocational truck and trailer solutions. Luc’s company was recently named one of Canada’s fastest growing companies with a three-year revenue growth rate of 132%. Luc is also an entrepreneur coaching client at CEO Coaching international.

Episode in a Tweet: Buying a distressed company entails risks, but once understood, could be your best deal ever.

Quick Background: CEOs who kept their foot on the gas during the pandemic are seeing a lot of distressed but valuable assets in their rear-view mirrors. There are bountiful opportunities to snag top talent that’s tired of waiting for their current employers to turn a corner. And companies that haven’t regained their footing might make attractive acquisition targets. But buying a company isn’t as simple as writing a check. In a business environment that’s still very unsettled, you need to make sure an acquisition is going to drive growth that makes investing your time and your resources worthwhile.

On today’s show, Luc Stang discusses a four-step process for bolt-on acquisitions that can make BIG happen with minimal risk and cash outlay.

Transcript: Download the full transcript here.

Keys to Successful Bolt-On Acquisitions from Luc Stang

1. Immerse yourself in your industry.

CEO time has been in short supply during the pandemic. But now that you’ve put your business back on an upward trajectory, you need to get back to the high-level responsibilities that you and you alone can tackle. You can’t start thinking about major moves like a bolt-on acquisition if you’re not giving yourself time to learn everything you can about your business space.

“Get to know your industry,” advises Luc. “Get to know your competitors very well. Learn the whole industry market. For myself, that means doing a lot of reading of trade publications, magazines, or books. That’s followed by attending different industry trade shows. Again, getting more and more immersed in the products and the technologies applied in different markets, both foreign and/or domestic markets, as well as starting to understand, what has driven some of the success of these other organizations?”

Covid-19 has both limited and broadened some of these educational opportunities. You might not be strolling through a convention center any time soon, but many events have gone virtual. Your industry might also have new volunteer positions on boards and professional organizations. It’s also important that you stay current on how the pandemic is impacting both government regulations and the best practices your competition is adopting.

Luc Stang: It’s about what we can do together, collaborating to make a better life for each stakeholder and creating better outcomes for all.

As you research and network, don’t be shy about letting insiders and other CEOs know that you’re interested in acquisitions. Ask questions, take notes, and be patient. If you can make the right connections organically, you won’t have to worry about paying commission fees to a third-party broker.

Luc says, “I let it be known that, if somebody is ever interested in having a further discussion, that I was a receptive advocate of looking to grow our organization and looking to find synergies, partnerships, joint ventures, or acquisitions that may fit their own plans. Most often, nobody wants to engage in a conversation about an exit, but it wasn’t too long into those relationships that conversations start happening and CEOs come back to me and say, “‘I’ve thought about what you said …’”

2. Analyze alignment potential.

“The second step is around ensuring and building upon that trust and integrity of our conversations,” says Luc. “That often starts with an invite to visit our own facilities and our own operations, and to be a little more transparent about what we’re doing and what’s working for us and what’s not. By letting our guard down and showing our own vulnerabilities, we found ourselves getting to the heart of matters, so the conversation is much quicker as opposed to being guarded or shielded.”

Luc recommends leaving money out of this part of the discussion. What he’s looking for isn’t a good price tag. He’s looking beyond a company’s distressed situation to see if the people, the culture, and the processes have potential to add value to his current operation.

“It’s more discussions around their passion for an industry,” Luc says, “what makes them tick, what’s important to them with regards to either product or technology, or their people. It could be a legacy element that’s important to them. When we find alignment on those pieces around what’s in it for them beyond money, then we found ourselves starting to align on trying to figure out ways that we could do things effectively.”

3. Build the right financing structure.

Finding the correct structure for a bolt-on acquisition largely depends on the goals of the two firms involved. But an added complexity is that, typically, these transactions involve the purchase of a distressed company. Institutional lenders might not be enthusiastic about facilitating these kinds of deals in the current business environment. Buyers need to be prepared to take on a larger portion of the financial responsibility than they might have in years past, which is why the first two steps in Luc’s process are so important to mitigating risk.

You’re also going to need real acquisition pros to work out the right mix of cash, credit, investments, and stock options. Luc says, “We have a fairly robust team on the finance side to support us, who’s more into the metrics and doing some deeper dives on the financial data to be performed. We have somebody else on the risk side. The lenders or the third parties would come in a little bit later, after we’ve done the bulk of our due diligence, have a deal penciled, are ready to commit to an LOI, and we’ve got the majority of our homework done.”

Just don’t be afraid to walk away if the numbers don’t add up. A distressed asset isn’t a bargain if you overpay for it. And if you’re confident in your valuations, patience can pay off in the long run. Luc recalls one acquisition he targeted that didn’t pan out … until it did.

“I was outbid by another party,” he says. “At that time, I thought it was a very rich price to pay. We ended up picking up that acquisition years later for a fraction of our original offer price. It turned out to be a phenomenal acquisition.”

4. Integrate people and culture.

Before he was a CEO, Luc worked for a large company that was acquired and reacquired three times in 10 years. This ground-level view of how cultural integration does and doesn’t work gave Luc perspective he uses to make acquisitions as stress-free as possible for everyone involved.

That starts with clear, open communication that sets expectations and eliminates surprises. Luc also prioritizes efficiency. Whatever changes are coming happen in a 30 or 60-day time frame so that people aren’t worrying about job security any longer than necessary.

Finally, Luc moves on to asserting the parent company’s focus on the health and safety of its employees through the kind of action workers appreciate, especially if they’re coming from a failing situation.

“It’s about what we can do together,” Luc says, “collaborating to make a better life for each and every stakeholder, and creating better outcomes for all. We make sure that our messaging is really clear and start making those fundamental physical changes. Simple things like improving lighting in a plant, you can see spirits pick up right away and see the smiles on people’s faces. We make sure the washrooms and cafeterias are completely up to par with proper regular maintenance and cleaning. This stuff might be natural in other sectors. But, in a heavy industrial sector, they’re not necessarily commonplace. By making some of those fundamental, small changes, you quickly get people to start embracing where we wanted to go on our journey of driving growth and driving a great place to work.”

Top Takeaways

1. Reconnect to your industry. If networking  and learning haven’t been top priorities during the pandemic, schedule some CEO time.

2. Stick to your values and your valuation. Paying too much for a company that doesn’t quite fit isn’t a bargain, it’s bad business.

3. Show new employees your values. Build a better company that everyone will be excited to work for.

Transcript: Download the full transcript here.


Buying a distressed company entails risks, but once understood, could be your best deal ever.
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About CEO Coaching International

CEO Coaching International works with the world’s top entrepreneurs, CEOs, and companies to dramatically grow their business, develop their people, and elevate their overall performance. Known globally for its success in coaching growth-focused entrepreneurs to meaningful exits, CEO Coaching International has coached more than 600 CEOs and entrepreneurs in more than 40 countries. Every coach at CEO Coaching International is a former CEO or President that has made big happen. The firm’s coaches have led double-digit sales and profit growth in businesses ranging in size from startups to over $1 billion, and many are founders that have led their companies through successful eight and nine figure exits. CEOs and entrepreneurs working with CEO Coaching International for three years or more have experienced an average EBITDA CAGR of 59% during their time as a client, more than five times the national average. For more information, please visit: https://www.ceocoachinginternational.com

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