When the pandemic hit the U.S. around March, many deals went on hold.
“Everybody was really scrambling to figure out how they're going to continue to operate their business on a day-to-day basis,” says Carlton D. Dean III, president of Demarrt Building Services, doing business as ServiceMaster by Demarrt. “I think some businesses were not set up to work remotely.”
However, once people began to adjust and figured out how to operate when the traditional business settings were closed or limited, owners became more open to selling their businesses.
“It's interesting, looking at it from a perspective of getting these people to continue to stay on with our business,” Dean says. “You have a lot of owners that want to exit. They see a shake-up in the market. They've been working their business for 20-30 years. They have this set number that they want to get to in their head. They might want to retire over the next three to five years and they've kind of been forced to get out now. So, [00:07:18] it’s one thing to take over a business, but it's also a different thing to take over a business and continue to keep that leadership around for two, three, five years to actually make that transition. And I'm seeing a lot more people want to make an exit and leave.
That’s led Dean to be more strategic in the acquisitions his companies make. He wants a business that’s essentially on autopilot. They have to have good cash flow and is already a good fit for what his companies are already doing.
“We don't have time for growing pains in current landscape of COVID,” he says.
Dean recalls looking at an acquisition about a year ago that had employees who were located across the country and all worked from home. How he viewed that situation now is much different than how he saw it then.
"At the time, we didn't like the acquisition because we felt we couldn't have control," Dean says. "You had people that we couldn't physically see them, people that are in Atlanta, Virginia, Texas, all over the place. The company made sense. It had been around long enough, making good EBITDA, but the fact that we tangibly couldn't see the people, talk to the people, build a relationship with the individuals, we decided to shy away from that deal. And looking back now, that kind of deal would be a sweetheart deal for us right now."
The pandemic, then, has encouraged Dean to look at acquisitions where more processes are automated, where the underlying IT infrastructure is good, and people are set up to work remote with laptops and access to enterprise software from home.
"So, those are all questions that now we're looking at the actual, not necessarily the business itself, but the infrastructure of the business. Those are the questions that we're really asking now," Dean says.
Dean spoke on the Smart Business Dealmakers Podcast about the state of his companies and how the pandemic is reshaping deal priorities.
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