In the world of dealmaking, words matter.
It’s one of the most important lessons Aaron Grossman has learned as he drives an aggressive acquisition strategy that he hopes will enable TalentLaunch to become a $1 billion business.
“When we are engaging with companies that are new to our family, it is imperative that we effectively communicate what to expect and when to expect it,” says Grossman, founder and CEO at the network of independently operated staffing and recruitment firms. “Building trust is critical. As an acquirer, you need to do what you say you’re going to do, when you say you’re going to do it. We have made drastic improvements in this area but still have a long ways to go.”
Grossman has made four acquisitions since 2014 and plans to make 31 more by the end of 2027. His company, which includes Alliance Solutions Group, took in $105 million in sales in 2018 and has 220 employees. He’s taking a humble, open-minded approach to the work that lies ahead to meet his ambitious goal.
Live and learn
The importance of process and expectation was driven home during an early deal opportunity Grossman was exploring. The protocol at TalentLaunch is for the CFO to conduct the financial due diligence and set the stage for Grossman to explore the acquisition target from a cultural standpoint. There was only one problem: The target didn’t know that this was how things were done.
“They thought by the time it got to me, they were in pretty good shape and this was going to be a deal that would close,” Grossman says of the target company. “What happened is the exact opposite. I got a chance to start meeting people and realized that even though financially, it was a really good company, culturally, there was a disconnect. So I negated the deal. The brokers were upset because they didn’t know that that was in the cards at that point. That was a lesson learned, to manage the expectation around how we evaluate a deal.”
When you’re executing an acquisition strategy and buying companies and integrating them into your organization, there is going to be uncertainty, perhaps even fear. Confidence and strength are always desired, but sometimes you also have to be honest about the situation at hand.
“There’s a lot of risk that’s being put at play,” Grossman says. “It can be scary. The more I can make a connection with the person that we might be acquiring and allow them to understand that we’re both scared together going at this thing, the better off we’re going to be.”
When TalentLaunch acquired Eugene, Oregon-based Selectemp in 2015, it made several mistakes.
“We provided timelines on when they would be integrated into our platform, and those timelines were changed at least three times,” Grossman says. “Ultimately, we were seven months off target with respect to the systems integration phase.”
The damage from those mistakes was minimized, however, by Grossman’s willingness to be upfront about his company’s relative lack of M&A experience.
“We told them that we were new to acquisitions, and we knew this was potentially going to get messy,” he says. “The feeling was that as long as we were culturally connected to them, and continued to build on that connection, we would be able to overcome the failures we would sustain through the integration process.”
Selectemp has established itself as a valuable part of the TalentLaunch network and a leading staffing agency in Oregon.
“We learned a lot from the experience,” Grossman says. “With our most recent acquisition of Bonney Staffing Center in Maine in 2018, we were able to communicate effectively and manage expectations that most aligned to the timelines we set forth.”
It’s OK to be emotional
The psychology of an acquisition is more abstract and is not easily measured. While Grossman tried to be mindful of this as TalentLaunch approached its growth strategy, he needed to address the emotional components of integrating the people who work within an acquired company.
“In truth, we came to understand that there is a ton of shock in that first week of a completed acquisition, with little ability for many of the acquired folks to absorb and understand the communication and expectations that were being relayed to them,” Grossman says. “We began to identify critical integration steps that had to happen within that first week so that we could properly support the critical concerns of the acquired company. Other than that, we began to focus on building trust and developing relationships to help ease the anxiety of our audience.”
Culture is a key variable, and Grossman and his team made an effort to help people feel more connected to TalentLaunch’s culture and ideally, to begin to be inspired by it.
“Once we eased many of the fears within the acquired company, we began to focus on educating our audience on what to expect with the integration process and what changes to how they work would eventually happen as a result of them coming into our platform,” he says. “This has resulted in a much more effective partnership in how we execute on integrating our acquisitions into our network.”
When the old way doesn’t work
TalentLaunch’s internal departments have also faced an adjustment. As a small company prior to executing on an acquisition plan, these groups were typically able to achieve success independently from each other.
“As we began acquiring businesses, it became clear that in order to successfully integrate these companies, our departments would have to come together and come up with an integration strategy that defined roles, responsibilities and timelines between the departments so that they could effectively work together to accomplish the task at hand,” Grossman says.
Two of the company’s early acquisitions drove hard consequences that forced Grossman’s team to adhere to this principle.
“It was fascinating to watch,” he says. “When we acquired a company, the nature of our accounting department was to hit the ground running. Their culture is all about getting things done. Project planning was not a strength at the time, and they just began doing what they needed to do to integrate the company. On the other hand, our technology department was all about project planning and mapping out a process on how to properly integrate the companies. The sense of urgency between both departments was not aligned, and the fact that the departments were acting independently from each other didn’t help the absolute need for collaboration.”
As a result, communication was not effective and eventually broke down. Expectations were not managed properly, and internal conflict ensued, Grossman says.
“As the CEO, I was forced to step in and become the referee around it, which I wasn’t anticipating would be part of my job responsibilities in an integration,” he says. “Over the course of time, we started to develop habits to influence departments to start working together and to look at themselves as part of a larger team.”
An effort was made to devise strategies together and come up with shared resources and tools to help influence partnering and collaboration.
“Fast forward to the present, and I feel we are a completely different company from a departmental perspective,” Grossman says. “There is now a culture of collaboration, and departments are very much intertwined on a variety of projects within our organization.”
Never stop trying, learning
As Grossman assesses the evolution of his dealmaking style, he can’t point to any one specific person as a role model.
“When we decided to embark on an acquisition strategy to support our growth goals, I spent over a year meeting with several businesses who had acquired businesses in the past,” Grossman says. “I wanted to understand their philosophy. I met with several investment bankers, as well as private equity companies, to learn about their approaches. Ultimately, this helped me drive a framework with respect to our approach.”
He has been a member of Entrepreneurs’ Organization for 10 years and often leverages EO when wanting to learn more about successful acquisitions and integrations.
“EO’s mission is to engage leading entrepreneurs to learn and grow,” Grossman says. “There was such a desire among my fellow members and sponsors to help me achieve the learning I would need to be able to properly develop a strategy that would ultimately be successful and scalable.”
Grossman has yet to develop a specific team that is focused exclusively on dealmaking and relies on people to wear multiple hats in helping to facilitate execution.
“For example, our CFO does his day job, plus he oversees corporate development, which is responsible for finding target companies,” he says. “He is also responsible for the front-end discussions and financial diligence for potential targeted companies. Finally, he took on the responsibility for being the lead project manager who oversees the integration phase over the first six months of an acquisition.”
The ultimate goal is to create a dedicated M&A team.
“We want to build out specific roles tied to corporate development and financial diligence, as well as project managers to build customized strategy for integration and a project coordinator to manage the integration phase,” he says. “We also want to have a small technology team whose focus is to effectively map data over to our platform and properly execute on the system implementation.”
In the meantime, he’ll continue pushing forward toward that $1 billion goal benchmark.
“We are very fortunate that we operate with a very strong culture, and that is helping us to fail forward, to learn and grow without our acquirees wanting to flee and run away,” Grossman says.