Greg LaLonde is not shy about pointing out his shortcomings.
In fact, he recognizes them so well that he has no problem stepping aside to let others lead in areas where he doesn’t measure up to his own expectations. That realization — and, perhaps more important, the realization of where he can add the most value — has turned Triplefin LLC from a turnaround story into a growth fairy tale.
When Triplefin was acquired in 2003, the company had about $3 million in revenue and was hemorrhaging cash. After finding stability, LaLonde and his team knew if they wanted to build the company they hoped for, they couldn’t just rely on organic growth.
As a result, today, LaLonde dedicates a third of his time to growth through acquisitions.
“It’s not to diminish the organic growth,” LaLonde, the CEO, says. “I think that even comes first and not by accident in our statement or goal. But again, I recognize I’m not as good as my colleagues in any sense in making that stuff happen, the organic side, so I emphasize the acquisition front of that goal.”
LaLonde says his interest in the topic is based on a lack of patience. But that haste, coupled with organic growth, is what has turned Triplefin into a $115 million provider of outsourced infrastructure, such as order processing and customer relations, for the consumer products and health care industries.
Here’s how LaLonde contributes to Triplefin’s growth by mapping out the acquisition process before picking up the phone.
Create a plan
To execute on any idea, you need to have a goal and a clearly defined strategy on how you’re going to get there. An acquisition is no different.
“A lot of times, I think acquisitions are somewhat reactive — someone approached the company or the company is aware of a particular firm and they extend exploratory discussions,” LaLonde says. “Whereas we have something called our acquisition strategy and it details what we’re trying to accomplish as well as the methodology that we’ll take to approach and assess opportunities.”
The wrong acquisition can cripple your company financially or even culturally. To find a company complementary to yours means the preparation and details put in on the front end are crucial.
The first question you need to ask yourself is: What are your company’s goals and objectives? Through that analysis, you can determine how large of a role acquisitions should play in your expansion.
Even if it doesn’t take precedent or it falls far down on your list, if there’s a possibility an acquisition is in your future, you need a plan.
“From a process perspective, follow as if it’s that pre-eminent spot,” LaLonde says. “In other words, have an acquisition strategy and have acquisition criteria.”
LaLonde says the company values and goals should be set by the CEO.
You need to look at internal and external factors that will ultimately play into your strategy and its subsequent criteria. Internally, you’re looking at your objectives and goals to see if and where an acquisition fits. Triplefin’s strategy includes finding niche players that can add an element of innovation to serve its clients’ needs.
Externally you might be looking at factors such as the marketplace or the economy.
For example, in this recession, Triplefin saw benefits in low interest rates, the number of distressed companies and a decrease in seller expectations. Triplefin was able to capitalize on market conditions and close four deals.
The strategy will be rendered useless unless you take it one step further and set criteria and parameters to weigh potential opportunities.
“Otherwise it can look a little bit as a scavenger hunt of sorts,” LaLonde says.
Questions to think about for your criteria are: How much are you willing to pay for a company? Where do you want the company in question to fall in terms of revenue and profitability? What are you looking for in leadership and employees? What are your geographic boundaries?
It might be something simple, like stating you will acquire no more than five businesses in a particular industry or a limited number of locations overall. Or, it could be a maximum limit on acquisition price.
“It just needs to be relative to where the particular company is. The acquisition criteria will be something that you can then take an opportunity and weigh it against your criteria to make sure it’s within those parameters.”
Part of Triplefin’s criteria plays off its decentralized-governance model. If Triplefin is looking to take over a company but leave the leadership intact, there are certain elements and characteristics it requires of that team, such as exhibiting a strong entrepreneurial spirit and the ability to work in a decentralized organization.
Remember, like LaLonde, you should view this as your guide to walk you through a successful acquisition. The more specific your strategy and its subsequent criteria and evaluation process, the narrower your company search and the more obvious a match may be.
“Get a strategy — get a clearly stated goal with excruciatingly detailed criteria,” he says. “What are your criteria? Your limitations? Because that’s going to really help as you (say), ‘OK, now who do I call?’”
Appoint a leader
The acquisition process is detailed and time-consuming, so the responsibility can’t be left to fall on just anyone’s shoulders.
Because it’s a natural undertaking for LaLonde’s strengths, he put himself in charge of the process.
He says when it comes to any priority, it’s not as much about balancing it with other duties but about setting expectations. Whether you as the CEO or one of your employees will take charge of acquisitions, if you outline a time commitment along with your strategy, you’re likely to be more successful.
“It’s going to take a significant commitment,” LaLonde says. “Delegate it to someone who can handle that. It can be a big undertaking. A lot of cash and a lot of capital can be potentially disrupted to your organization as you work to integrate it. Be very realistic and be clear in your criteria that this is going to be a corner of my time for the next year — really lay that out.”
If you’ve decided to give the responsibility to someone within your organization, make sure you choose wisely.
“If they don’t have prior M&A experience, don’t give it to them,” LaLonde says. “There’s so much at risk that you have to really trust the person. That’s why I like one of your stars, someone you can really (trust), you have confidence in their ability to stick to the strategy you’ve outlined and bring you the right deal.”
Part of the intrigue in picking the right person is that he or she doesn’t have to come with a specific job title. But the person must have certain characteristics. You need a good communicator — someone who can regularly give you feedback and discuss prospects, opportunities and competitors. Others are fortitude and thick skin.
“Obviously you’re going to be rejected,” LaLonde says. “The whole point is to be rejected. You have to really push for it.”
LaLonde recalls being turned down the first time he went after RxHope, a Triplefin patient assistance and reimbursement services company. He sat down in the former owner’s office and the gentleman just stood up and left. Five minutes later, LaLonde was escorted out
and left feeling dejected as he took a cab back to the airport. He later found the owner was in the middle of a falling out with the intermediary who got him the appointment.
LaLonde e-mailed the owner two years later to see if they could meet again. Nine months after that appointment, RxHope was a Triplefin company.
It also may help to look at your strategy when picking the right leader.
“It could be someone who has particular subject matter expertise in a field so the targets will naturally want to talk to him or her,” LaLonde says. “Then you can augment that person with maybe a good lawyer or a good accountant.”
Keep in mind this person will be the face of your company, and reputation is everything, especially when you’re first getting started in acquisitions.
“Ultimately, though, reputations build, so the success, I think, down the road can be nicely and exponentially a benefit from getting (the right) person in this role,” he says.
Work with clients
LaLonde has no problem picking up the phone and detailing his interests in acquiring the company on the other end of the line. To leverage that conversation, most of the time he has what the person on the other end doesn’t know: client intelligence.
“If you’ve initiated the call, hopefully you have some client intel that more or less you shouldn’t even know about,” LaLonde says. “So something has to tip you — someone’s told you where to go fish. You’re not just going out on a boat and winging it. Use that intelligence to refine a short list of targets.”
Triplefin’s culture involves being obsessively customer-centric, so it’s no surprise that many of its acquisitions are a result of conversations with clients.
“I think that is just good sense on our team’s part to involve them,” LaLonde says.
When you have a chance to get in front of your customers, ask them how things are going, if there are areas where they would like to improve their business, spaces they would like to expand into. LaLonde has found that, by really building relationships, customers have shared their needs along with meaningful industry insight.
For instance, Triplefin recently ventured into reimbursement services, which there wasn’t an answer for in the industry. The initiative started when a client said it was looking for more innovative and cost-effective processes to handle that function. In working together to answer the manufacturing client’s needs, Triplefin acquired a mail-order pharmacy company for its technology. With support and insight from the client, Triplefin has been able to roll out a new solution.
As you focus on the organic growth of your business, you must remain cognizant of your clients’ needs. Ask yourself if an acquisition of some kind may be the answer. Ask clients if they have interest in possible new lines of growth and ask if they know of complementary companies to go after.
“Then it’s, ‘Well, where do we go? Can we do it on our own? Start from scratch? Build versus buy? Or is there someone out there who is similarly situated from a culture perspective?’” LaLonde says.
Your acquisition strategy should highlight the process your clients play in growing your company, LaLonde says. It’s something he’s working to enhance as he updates Triplefin’s written plan to include larger acquisitions. In 2009, one of Triplefin’s operating companies earned $5 million, which will now allow it to do more — and larger — deals.
But even if a deal falls through, you can still learn something in the course of the acquisition process.
“There’s a whole slew of data and intelligence both competitive and client-facing that can be useful to the CEO and leadership organization at large,” LaLonde says. “It has some tangential benefits other than actual deals that get consummated, and that’s the knowledge that comes with running that exercise or running that process.”
How to reach: Triplefin LLC, (513) 794-9870 or www.triplefin.com