Because they buy companies from founder- or owner-led organizations, 365 Retail Markets COO Brittany Westerman says even before the actual process begins, they try to build a relationship with the CEO/founder. That helps her and her team figure out the owner’s motivation for selling so that they can understand better what an integration path looks like, what the diligence path looks like, and bring it all together.
“And by really understanding that we can figure out what's the deal structure that we're going to figure out that'll work for everyone," Westerman told attendees at the Detroit Smart Business Dealmakers Conference. "Are they rolling equity? Are we doing some hold backs, etc.? So, we really start with that. And then once we get to the LOI stage, we can build all of that in. So, that really helps us figure out how we're de-risking post acquisition. How are we making sure that once we are working on integration, that CEO is a part of the mission and a part of the vision going forward?”
In addition to lining up their advisers, something else they focus on is figuring out what the internal deal team is going to be so that they can align it to the company that they’re acquiring. That helps them make sure that they're building the right relationships with those they’re acquiring so that once both sides are through any hairiness that may happen during the process, they can all work together and continue to grow the company.
Something she says they work hard on is figuring out a deal structure that will work for the company as well as the people have invested in them.
“And what we've really done is we've actually put it into the LOI, and put as much as we can into an LOI," she says. "So, we determine our own non-negotiables in advance so we can get a little bit more creative and negotiate it in that process so we're more talking about negotiating the structure. And then we can figure out the actual finality and tactical side of it once we get to the purchase agreement. So, that's really helped us a lot.”
Something she says they run into as they get close to closing a deal, is that things can tend to linger. When they reach out to the company to ask what’s happening, they find out the company doesn't understand something vital to the process. So, what they've started to do is preemptively have educational sessions with the acquisition target throughout the process, which she says has helped.
Because they are private equity backed, they have to think about the investment lifecycle of the private equity company while also thinking about acquiring.
“We're kind of sandwiched in the middle right now," she says. "So, we're watching what's happening in private equity to understand what's going to happen with us while also trying to acquire.”
She says they did a lot in 2021 and into 2022, but have since had a little bit of breathing room to digest what they've done. Now, she says, they are starting to see a lot more activity, things coming back to market and pricing stabilizing a little bit after skyrocketing. She says they haven't seen as many deals make it to close yet.
“There's a bunch of things at the end of last year, at least in our industry, that started and then fizzled out," Westerman says. "So, seeing if that continues, but we're in process right now to buy a company so it seems to be going pretty well.”
