Vice president of strategy at Westwood (Minneapolis, MN), an awarding-winning firm that provides multi-disciplined surveying and engineering services.
By Liisa Andreassen
Hanifan supports Westwood in its development, execution, and monitoring of the strategic plan objectives to achieve the company goals. He oversees the company acquisition pipeline and is a member of the team responsible for identifying and evaluating potential acquisitions.
“At Westwood, we work hard to integrate the seller at a pace that is comfortable for them,” Hanifan says. “We listen to the challenges and work very hard to overcome them. This is a people business and our number one priority is to take care of the people.”
A conversation with Ken Hanifan.
The Zweig Letter: Your firm was acquired by Westwood in 2019. Tell me about the transition. What was your role before and how has it changed?
Ken Hanifan: Prior to the acquisition, my role in Slater Hanifan Group was as CEO and president. Post transaction, my role changed several times throughout the more than four years since the transaction. Fortunately, Westwood’s leadership has worked with me to find a seat on the bus that is rewarding. In my current role, we work on the short-, mid-, and long-term strategic planning for the company, including mergers and acquisitions.
TZL: Your online bio states that you’re responsible for identifying and evaluating potential acquisitions. What are the key factors that most influence your decision to move forward or not?
KH: There are several key factors that play into our decision to move forward including: Do our services match up well? What is the depth of their bench at the leadership level? Will our cultures blend well? What are the future plans for the leadership team? How will they integrate into Westwood? Do they want to continue to grow?
TZL: Since you’ve been in this role, what have been the most challenging acquisitions Westwood has made and why? How were those challenges met?
KH: Each acquisition has its own challenges, but most revolve around the people. Change is difficult and it is the seller’s and buyer’s responsibility to help the people integrate into the new company. It could easily take 18 months for people to get comfortable with the changes that occur and to discover whether the buyer has lived up to the promises made. At Westwood, we work hard to integrate the seller at a pace that is comfortable for them. We listen to the challenges and work very hard to overcome them. This is a people business and our number one priority is to take care of the people.
TZL: What do you think is the most important skill that sets you up for success? Does your engineering background play a role? How?
KH: An engineering background does help with my role as it’s geared around solving problems. There’s always an opportunity with every challenge. The most important skill set that helps us be successful is our ability to listen, relate, and work toward a common solution.
TZL: Tell me a little about the process involved when it comes to researching potential mergers and acquisitions? How are they researched? How long does it take? Who’s involved?
KH: Finding the right company to acquire is quite extensive. Are they looking to sell? Brokers have been amazing at bringing opportunities to us. The more experience the broker has in our industry the better. Warm introductions work the best. Cold calling never goes away. Every cold call that gets answered at least ends up in a good conversation and perhaps someday an acquisition. The internet and well-crafted CIMs are helpful in getting the due diligence started. We like to have as much information as possible upfront to help put together a good valuation. Brokers that educate the sellers on the true value of their company are exceptional. A thorough due diligence period takes about 90 days and if the seller is not truly a seller, this process could take several months to develop the relationship to the point where it’s time to take that next step. At Westwood, our initial calls involve just a few people and as the potential increases, we bring in the appropriate people to help each side get to know each other better (HR, finance, directors of specific services or markets, etc.).
TZL: How many acquisitions has Westwood completed since you joined them in 2019?
TZL: How does Westwood attract so many strong acquisition partners in such a competitive M&A environment? What differentiates you?
KH: We’re looking for great partners who we can work with for several years into the future. We’re not looking for someone who just wants the highest payout and then is gone. There are companies out there that recognize this and that they will not just become a number in a much larger organization.
TZL: What advice would you have for a buyer or seller that is considering M&A for the first time?
KH: Do your homework. Ask the right questions. What type of buyer are you looking for – PE, public, or a company like yours? Attend some conferences to learn about all the options. Are you ready to take that step of not being in charge? Make sure the leadership/culture you are teaming with fits yours.
TZL: Many expect record transaction volume in 2022, but high valuations and macro factors such as inflation, talent shortages, and rising material costs bear watching. How has the risk environment changed in the last two years? Will transaction volumes wax or wane amid a dynamic business landscape?
KH: The transaction volume in 2022 will be high as many companies are enticed by the higher valuations being presented at each offer. I believe there will be a pull back as inflation and the threat of a recession becomes more of a reality, but that will be delayed. Especially with the infrastructure bill out there. Companies that focus on private development will be hit first, presenting an opportunity for buyers. Companies that are positioned well will continue to acquire for quite some time.
TZL: Is Westwood taking any precautionary measures relating to what some believe is an impending recession?
KH: Yes. We’re looking at which markets may be affected by a recession. We’re also looking for opportunities that might present and shoring up the areas that may be negatively affected.
TZL: How has the partnership of HSG and Westwood created opportunities for HSG’s staff that wouldn’t have been possible previously?
KH: Initially, there was that fear of change. We had to work through that with some of our team and now they have become an integral part of the Westwood leadership team. We’ve had people relocate to other offices to advance their careers which was not possible without the acquisition. With the acquisitions that we have made since then, people who were part of SHG have not taken on more of a regional/national role.
TZL: How, if at all, does Westwood’s partnership with Endurance Partners shape your approach to M&A? How involved is Endurance’s team in the decision-making of Westwood’s acquisition strategy?
KH: The Endurance partnership has brought many opportunities for us to take advantage of including financial backing, experience sharing from the board and putting us on the map to being able to achieve our hefty goals that we have set for ourselves. We have an M&A committee that helps to evaluate potential acquisitions which are ultimately approved by the board. Members of the Endurance team provide many years of experience and knowledge in helping us to achieve our vision. However, the Endurance team relies on our leadership to build the company.
TZL: Some buyers and sellers think it best to “discuss the numbers” early on in an M&A process to be sure that both parties are in the same ballpark before diving too deeply into cultural fit and operational viability. What is your opinion on this?
KH: We prefer parallel paths. Getting to know each other is critical in the evaluation of the company. Both sides must be comfortable with each other in evaluating the numbers as some companies are more sophisticated in financial reporting than others. Having a good relationship helps with the ability to ask some direct questions about the numbers. That does not mean to wait too long in making sure both parties are in the ballpark.