Consumer Services
Doing due diligence
How to make a fitting acquisition
By Brooke Bates
Smart Business Pittsburgh | June 2009
Page 1 of 2
Robert O. Agbede, president and CEO, Chester Engineers Inc.
Robert O. Agbede isn’t a fan of Internet dating. The president and CEO of Chester Engineers Inc. prefers good old-fashioned face-to-face interaction.
Which is exactly how he approaches business matchmaking. In December 2008, he announced the acquisition of several business units from N.A. Water Systems, including Maryland-based VIEW Engineering.
“We have never done an acquisition that we don’t know the owner for some time,” says Agbede, whose engineering services firm is the largest African-American-owned firm of its kind in the United States, providing global water, wastewater and environmental services.
Before making an acquisition, Agbede looks beyond the management team to find a fit with employees and clients.
“We know the kind of the companies we’re looking for,” says Agbede, who led his 300-employee firm to 2008 revenue of $55 million. “So we take our time finding them. We have to align also in values and vision.”
Smart Business spoke with Agbede about “dating” a company through employee and client interaction before you make an acquisition.
Work together. Buying a company is like a marriage; you have to date first. Take the time to find out about them. Do your due diligence. Some would spend a lot more time on financials; I spend more time on the emotional quotient.
Sometimes they have their own expectations and nobody is expressing them before the closing until after they come in, and then you’re finding out they don’t fit. So I spend more time on the values, on honesty, on the integrity of the company.
Make sure you’ve done some work together. You don’t kiss on the first date. So it’d just be like holding hands. Do some little jobs [together]. You start getting a sense of how they approach work. You’re trying to test not just their technical competence but their integrity. Did they overcharge? Do they bill for every little thing?
So it’s those kinds of things that you have to say, ‘OK, does this fit into my model?’ Then you go to a much bigger job and start introducing the senior management to each other.
A lot of times the best marriages develop out of friendship, so you get to the friendship thing first. Then after a while, you can say, ‘Hey, having worked together for some time, I think it would make sense for us to look into marrying.’
People don’t always like the word, ‘I’m buying you,’ as opposed to, ‘you merging with me.’ [You say], ‘This is what merge means: You will be part of our family. Would that interest you?’ But it’s not a question that you just pop out of nowhere. It’s not like saying to somebody on the street, ‘Would you marry me?’
Talk to clients. On some big projects, we’ll have to go talk to the clients. We will insist on talking to the clients. Most [sellers] don’t like that because they don’t want anyone to know they’ve been for sale.
We want to know clients of a large account. Would clients continue to use you? Does the client like them? The client might say, ‘Shoot, I’ve been trying to get rid of them. I can’t stand the folks.’ Well, does that mean they won’t work with you?
So we ask the clients about those kinds of things: Do they enjoy working with them? If we buy, will they continue to work with us?
Suppose their client says no. Then we have to rethink our position, because they said there’d be clients. That’s one of the reasons why we want to buy them. So we either decide we don’t want to do it, or we’re going to do it at a very discounted price.
