E228: Acquiring an IT MSP: Strategies, Overcoming Challenges, and Ensuring a Smooth Transition - Watch Here

About the Guest:

Nick Akers is a seasoned professional in the mergers and acquisitions space, currently serving as the CEO of STL Communications, an IT managed service provider. With a technical education background and extensive experience in the specialty chemical sector, Nick has successfully navigated the complex world of business acquisitions. His journey spans from co-founding a venture capital-funded startup to working closely with private equity firms as an independent sponsor. Nick's recent milestone includes acquiring and running STL Communications, where he focuses on delivering exceptional customer service and driving growth.

Episode Summary:

In this engaging episode of the How2Exit podcast, host Ronald Skelton sits down with Nick Akers to delve into the intricate journey of acquiring STL Communications. Nick shares his extensive background, from co-founding a venture-backed startup to transitioning into the M&A world. He provides a vivid recount of the processes, challenges, and strategies involved in purchasing an IT managed service provider.

Nick discusses his decision-making process in pivoting from a specialty chemical acquisition thesis to becoming industry agnostic, enabling a broader search that eventually led him to engage with a local broker. This decisive meeting resulted in the acquisition of STL Communications, a company requiring a delicate transition period where Nick's leadership played a crucial role in retaining and reassuring the employees. Throughout the episode, they explore valuable lessons learned, the importance of due diligence, customer relationship management, and strategies for successful business transitions, all underscored with practical insights and real-world experiences.

Key Takeaways:

• Pivoting Strategies: Nick's journey emphasizes the importance of adaptability in search strategies, pivoting from a highly specific industry focus to a broader, more flexible approach.
• Employee Retention: Post-acquisition, the significance of actively engaging with and reassuring employees is critical to maintaining morale and productivity.
• Customer Service Focus: Differentiating in a competitive market by prioritizing exceptional customer service over mere product offerings.
• Due Diligence Essentials: Understanding the nuances of customer contracts and securing reps and warrants on accounts receivable are crucial for protecting value in acquisitions.
• Ownership Models: Insights on weighing the benefits of self-funded searches versus structured programs like search funds, particularly focusing on control and long-term returns.

Notable Quotes:

1. "The fastest way to double the size of your business is with your signature."
2. "My role gets the maximum benefit at the higher the IRR return."
3. "Just that simple gesture, right? Somebody asks you or makes a suggestion and then you do it. That goes much further than I think most of us realize."
4. "There are no shortcuts. You have to answer the phone Saturday at 09:00 at night."
5. "If you want to maximize your own benefit and achieve those 25 plus, 30% plus IRR hurdles, you're basically looking at doubling the size of the business in some timeframe."

Article:

Mastering the Art of Acquiring a Business: Insights from Nick Akers' Journey

Key Takeaways

• Holistic Approach to Business Acquisition: Understand different acquisition models and choose based on personal and business goals, encompassing both funded and self-funded searches.
• Importance of Customer and Employee Retention: Focusing on maintaining and improving relationships with both customers and employees post-acquisition to ensure continuity and growth.
• Value of Structured Support: Utilize the resources and expertise provided by an accelerator program to enhance the chances of a successful acquisition.

Navigating Various Business Acquisition Models

When delving into the complex world of business acquisitions, it's essential to understand the diverse models available. This understanding calls for a comparison between structured acquisition programs and self-funded searches.

Nick Akers, in his conversation with Ronald Skelton on the How to Exit podcast, shares his extensive journey from a private equity pathway to embracing a structured search fund model. He underscores the importance of evaluating the distinct elements of each model accurately, noting their implications on control and financial outcomes.

"What I advise people, searchers, prospective searchers, is if you want to go down this road, you owe it to yourself to really spend the brain cycles and think through each of the different models that you can do a search around and be very thoughtful about a self-funded search."

Akers' initial involvement with independent sponsors highlights an exploration into search capital dynamics, where leveraging structured programs offered more than just financial backing. The strategic advantage of having an experienced team, such as Nova Stone Capital, facilitated a smoother transaction process, offering substantial in-house support from legal to analytical ends. This highlights the broader implication of structured programs not just as fund providers but as crucial facilitators of successful acquisitions.

While Akers emphasizes the benefits of structured programs, he also recommends self-funded searches due to the significant control and higher financial reward they might offer if approached correctly. Entrepreneurs must evaluate personal circumstances, available resources, and long-term goals meticulously.

Maintaining Customer and Employee Relationships Post-Acquisition

A vital part of any business acquisition is managing human relationships, both with customers and employees. Nick Akers' experience showcases the critical importance of addressing the concerns and building trust amongst stakeholders immediately after acquiring a business.

Upon acquiring STL Communications, Akers faced a whirlwind of emotions from employees when they learned about the change in ownership.

"There was a bit of pandemonium that happened. So some people crying. It was quite the interesting day."

His immediate response was to reassure and connect with the workforce profoundly. He initiated a series of one-on-one meetings, firm in his resolve to consider their opinions and foster a culture of openness.

"We had an all-company meeting in the conference room, and I had notebooks for everybody… write them down in this notebook. I can't promise I will do everything that you write down, but I can promise I'll listen to you."

This proactive approach not only reinforced trust but also facilitated smoother transitions, preserving employee confidence and productivity. Moreover, it fortified better relationships with the existing customers, ensuring service continuity and reinforcing commitment to customer satisfaction.

Leveraging Structured Support for Successful Acquisitions

Structured support systems play a considerable role in navigating the intricacies of business acquisitions. The operational support provided by accelerators or structured programs like Nova Stone Capital is invaluable for first-time acquirers and seasoned entrepreneurs alike.

Akers' journey highlights how partnering with an accelerator eased the various phases of his business acquisition, from financing to due diligence, legal proceedings, and beyond. The emphasis on not just monetary support but also strategic guidance and mentorship from seasoned professionals was instrumental.

"They have in house legal, they have in house deal origination capabilities, their m and a team that really, you know, they're the Excel wizards. I viewed partnering with them as really improving the odds of being successful."

Programs like these offer a structured pathway to acquisitions, mitigating risks, and amplifying the success rate. Such support is particularly vital when dealing with complex elements like recurring revenue model analysis, customer contract reviews, and employee retention strategies—all crucial factors in ensuring a successful business transition and growth.

A critical takeaway from Akers' experience is the need for aspiring acquirers to evaluate the potential of these structured support systems thoroughly. Such programs not only provide financial backing but also a holistic support system, encompassing legal, analytical, and operational domains, ultimately paving the way for a more seamless, efficient, and successful business acquisition journey.

Addressing these elements adeptly fosters a robust foundation for new ownership, ensuring stability and promoting growth. Each acquisition brings unique challenges and opportunities, and mastering these intricacies is key to a prosperous venture.

From the initial evaluations and strategic decisions to the delicate post-acquisition phase, Akers' journey offers a comprehensive guide for potential business acquirers. Whether opting for structured search funds for their robust support systems or embracing the autonomy offered by self-funded searches, understanding these dynamics is crucial. Additionally, maintaining robust customer and employee relationships post-acquisition can notably impact the success and growth trajectory of the acquired business, highlighting the nuanced yet critical nature of human relationships in entrepreneurship.

---- MORE COOL STUFF ---

Are you ready to take your podcast listening to the next level? Subscribe to "DEEPER by How2Exit" newsletter and never miss out on our latest episodes. Join our  newsletter  HERE

Want to stay in touch with what's happening in the Main Street M&A Space?  Subscribe to Growth & Acquisitions(Formerly The Hub)