Rick Milenthal’s dealmaking philosophy focuses beyond the financials

 

For more than 30 years, Rick Milenthal, chairman and CEO of The Shipyard, has been active in investments, transactions, mergers and partnerships.

He estimates that he’s been involved in about 20 deals during his career in the marketing services industry, as he’s tried to keep a national and sometimes international footprint.

Milenthal’s latest joint venture does business as The Shipyard. It was formed in 2013 by joining his companies, People To My Site LLC and Fugent Inc. The Shipyard also just acquired advertising and marketing services businesses in the Denver, New York City and Los Angeles areas, which brings the employee count up to more than 160.

“We look at acquisitions, in our business, in the marketing services business, as almost as much as talent acquisition, as transactions,” he says.

Acquisitions can expand client relationships or attract talent. Milenthal also utilizes that talent, including the former business owner and entrepreneur, to create organic and transactional growth.

Through deals large and small, Milenthal has built up certain philosophies. When he didn’t follow those tenants, the transactions weren’t as successful.

“I don’t learn these things out of any prophetic tendencies,” he says. “We learned how to do this well and we’ve learned how to do it poorly — and doing it well is a lot more fun.”

Consider intangibles

Whether you’re acquiring a company or selling one, you need to be more than financially or growth oriented. The people and cultures are more critical than the financial structure, Milenthal says.

“Don’t let opportunity trump strategy, meaning that you really do need to do these things in a strategic way,” he says.

When you’re acquiring another organization, it should be about building a more vibrant organization — adding people who can create something that will generate growth.

“We don’t do (these transactions) for savings. We don’t do them for infrastructure or efficiencies,” Milenthal says. “We do it because one plus one equals five and it creates growth.”

Picture the day after the transaction, he says. Ask yourself: Will this be more positive? Will this be more vibrant? Will this be a growth opportunity for my people and company?

“If you like that picture, then come back and start to work out what the arrangement will be,” Milenthal says.

One way to spot whether the people and culture will mesh is to ensure that top leadership spends a lot of time together, pre-transaction, he says.

You need time to plan, conceive how you work together and see how the dynamic will work, Milenthal says. You’ll be able to tell whether you’re about to do something positive. There’s no faking it.

“It sounds simple, but it’s rarely done,” he says.

Focus on the qualitative

Looking past the financials and considering what happens afterwards is just as important with a business sale. Even if you’re retiring, Milenthal says you have built up the business and likely care about the long-term plans and the employees who trusted in your decision-making.

“Generally, except in unique situations, the financial transaction with qualified buyers is not that different — it’s different by either a few percentage points or a fraction of the enterprise value,” Milenthal says.

You shouldn’t do a deal that doesn’t meet your financial goals, but most sellers underplay the qualitative issues of life after the deal, he says.

If you’re going to stay with the company, Milenthal says accept the fact that everything won’t be the same, even if the deal states otherwise.

“If somebody is going to, whether it’s through stock or cash or some investment, be involved in your business, your life is going to change and it’s going to change significantly,” he says. “You need to understand those changes. You need to embrace those changes. You need to get comfortable with those changes.”

Provide space

With a lot of pre-transaction planning, Milenthal says the integration goes smoother. But you also need to recognize that different locations, capabilities, cultures and ways of doing business doesn’t mean you can’t have shared values and a positive dynamic.

You, as the business leader, shouldn’t try to smooth over those differences.

“Once you’ve built an organization that can celebrate the differences,” Milenthal says, “it relieves a lot of the potential tension of working together.”

The companies Milenthal buys are headed by entrepreneurs who he wants to keep involved, so he works to be someone they can trust, who talks to them as a peer and spends time understanding the landscape, mission and goals of that business.

Entrepreneurs aren’t interested in a dysfunctional decision-making process, he says, and they expect to be heard and respected. They want you to make a well-thought out decision, and then they want that decision executed, even if they don’t agree with it.

These entrepreneurs also need space and a mission, so they can still express their entrepreneurism.

“Most of these people do not need a boss. They have built the business, often from the ground up. They are dynamic people,” Milenthal says.

“They would just like to join something that might give them a little bigger playing field and a more interesting growth-oriented vision for the future,” he says. “So, you really need to embrace their leadership.”