Thinking of Buying?

Feb 24, 2003

Right now may be the best time ever to go out and buy another firm. People are depressed, their sense of optimism is considerably dimmer, and many A/E/P and environmental firms are performing accordingly. That reduces expectations on the part of sellers. And that’s good for buyers— those who aren’t afraid to step up to the table and bet some chips may well be the ones that really cash in when things get better (and they always do). It’s kind of like my Grandpa, Charlie Boersig. He did well for himself in the stock market by buying in the depression when prices were low and then riding the wave up. Or our landlords here in Natick, who bought our office complex for $5.8 million and then a few years later saw it worth more than $30 million. I even get lucky occasionally myself. The house I bought in March of 2000 (and it was an expensive white elephant that no one wanted) has more than doubled in value since. The same opportunity exists for design and environmental firms to buy other firms in our business right now. Whether you are buying quality (profitable, growing firms) or buying dogs (unprofitable, declining firms), opportunities abound. Either can make sense, depending on the specifics of the buyer and seller, and the price. Here’s my advice: Never say “no” until you know what you need to know to say it. I got an e-mail from a friend of a friend the other day. A guy he used to work with had a motorcycle in his basement he wanted to get rid of. While I used to collect and restore bikes, I have been selling down for the last year or more and didn’t really have any interest. But I got the seller’s e-mail address anyway and dropped him a line to find out what he had. He told me it was a 1967 Harley Sprint “H” model. I always liked these Italian Harleys and it turns out they only made 2000 of this particular model. I ended up buying the bike…dirty but all there…for $100! The point is many firms are just like this. I can recall one that sold here in the Boston area for a single digit percentage of revenue that had a long history and a big backlog. But they also had bad management and a horrible income statement and balance sheet. I can assure you that the buyers of that firm should have made their money back in six months yet most firms would never have even considered talking to these people! You won’t get lucky unless you play the game. You know a lot of people think other people in business are lucky if they are successful. But it’s funny how luck favors the prepared mind. You have to be looking at opportunities constantly if you are going to find a deal. If you say “no” too fast, you might miss out. It doesn’t mean you need to waste a lot of time, fly all over the place, or spend a lot of money on experts for appraisals and investigations, either. Those expenses come later. You at least need to be open to looking at financials and talking on the phone. You can usually determine what you need to know to decide if you want to pursue further discussions. Follow your gut! But take a look! Have more than one alternative. One of the biggest mistakes companies make is they get into discussions with a seller and that’s the only seller they are talking to. Then their egos get wrapped up in making the deal happen regardless of whether it is a good deal. This is when you really get into trouble! A choice of one is not much of a choice. If you are looking continuously, you will have a much better sense of a good deal and the proper fit when you see it than if you don’t have this kind of perspective. This is so important! Don’t make assumptions about what the buyer wants out of the transaction. They aren’t all trying to get rich. They aren’t all trying to do what’s best for themselves. There are many unselfish buyers who want what’s best for their employees and clients. If you are the buyer it’s important you know what the seller wants so you can give it to them. Being able to “buy smart” when it comes to mergers and acquisitions is one of the essential wealth-building strategies available to any design or environmental firm. Originally published 02/24/2003.

About Zweig Group

Zweig Group, a four-time Inc. 500/5000 honoree, is the premiere authority in AEC management consulting, the go-to source for industry research, and the leading provider of customized learning and training. Zweig Group specializes in four core consulting areas: Talent, Performance, Growth, and Transition, including innovative solutions in mergers and acquisitions, strategic planning, financial management, ownership transition, executive search, business development, valuation, and more. Zweig Group exists to help AEC firms succeed in a competitive marketplace. The firm has offices in Dallas and Fayetteville, Arkansas.