It only takes one bad deal to put your company’s entire future at risk, says Everstream President and CEO Brett Lindsey.
“Any time you’re doing a transaction, the risk around it is enormous,” Lindsey says. “Understanding what those risks are for you and the business is critical. There is a lot of thought that needs to go into making certain that the deal can not only close, but be implemented and deliver the results that you’re after. If you fail to do so and get so caught up in doing the deal because it sounds sexy and the idea of growing your business is alluring, it can end up being very detrimental to your business.”
Lindsey has established a track record of dealmaking success. Successive acquisitions in 2016 and 2017 tripled Everstream’s revenue and put the company’s EBITDA in a position to grow by almost 10 times. In September 2018, he closed a deal to sell Everstream to Australia’s AMP Capital for more than $330 million.
This week, we return to our earlier conversation with Lindsey to learn more about the key tenets of his dealmaking philosophy.
Assess the opportunity from both sides
As you zero in on a potential acquisition target, it’s important to evaluate what is motivating the seller to pursue a deal, as well as your ability to meet those expectations.
“Is the business healthy enough for you to deliver the returns that they are after?” Lindsey says. “Is the opportunity for that business big enough that you can pay what they are after?”
Lindsey gives a lot of credit to Thompson Hine for providing M&A counsel that addresses these questions and others, which ultimately leads to more informed decisions on deal opportunities.
“Their ability to quickly understand potential gotchas through the process and challenge our assumptions to make sure that we’re thinking everything through is critical,” Lindsey says. “A strong advisory team can help guide you through the M&A process. Frankly, you’re going to be paying them a significant sum of money to do that, so you want to soak up everything you can from them along the way.”
The goal is to create an environment in which both the buyer and the seller feel good about the transaction.
“You want the seller to feel confident that you’re going to take care of their company post-closing,” Lindsey says.
Dig for the right opportunity
Once you’ve got the fundamentals of how deals get done, you can take steps to create your own pipeline of M&A opportunities.
“If you’re building relationships with people in your sector, when somebody decides that they’re ready to sell and you’ve built a relationship with them over time, you’re going to be one of the first calls,” Lindsey says. “When you think of a reason why you should be calling them to have a conversation about acquiring them or acquiring a piece of their business, there’s a relationship that allows for them to feel like they can trust you and that you’re going to be fair. We’ve done deals that had no bankers involved because we were able to leverage relationships that we had built over time.”
One thing you can’t do if you expect to be a successful dealmaker is live in fear.
“If you’re scared to get out of your comfort zone and try, then you're never going to get any of these deals done,” Lindsey says. “The second one is always easier than the first one, and by the fourth one, it becomes almost rote. You have begun to really understand fundamentally what you need to do to win the deal. That only comes with experience and practice, just like anything else that you want to be good at.
“We did a deal out of bankruptcy that was one of the most accretive deals we could have done. The company had three principals who were all on a different page and all had different intentions about selling the business. It’s really up to you to dig and uncover the gems and figure out if they are worth the grief of going through it.”
