If Bill Fink’s company tried online dating, it still might not find a suitable mate.
Area Wide Protective Inc. hits a niche that not many companies share: providing temporary traffic control services, like roadblocks and traffic flaggers, for public utility companies. So finding a similar company for a strategic acquisition would be tough. Not only would it have to match business interests, but it would also have to match management philosophies, staffs and cultures.
“Think of the two most finicky people that have ever used eHarmony.com,” says Fink, founder, president and CEO of AWP.
But Fink realized that his company, which posted 2007 revenue of $27.1 million, couldn’t stay single, either. He told his 650 employees: “We’ve all invested a lot in growing this company. It should not hinge on one man’s health or one man’s wallet. It’s important that we build a foundation that will sustain the company after Bill Fink is gone.”
With a strategic acquisition out of the question, Fink instead sought a partnership with a private equity firm. That way, he could unload some financial stress without relinquishing his post.
And even though retirement is not on the 57-year-old’s short-term agenda, the partnership is also helping him secure the company’s future.
“Nothing has changed in terms of dayto-day,” Fink says, after finalizing the deal last August with Blue Point Capital Partners. “What has changed is our vista; our horizons have just grown immeasurably. We can think about growing this company in ways that probably weren’t possible before.”
Here’s how Fink secured AWP’s long-term success by bringing financial partners on board without changing his course.
Narrow the search
Compared to a strategic acquisition, a private equity firm is much easier to find because it’s only concerned with rate of return. It’s still not simple, but if your potential and plans for growth are obvious, you probably won’t have to look too far for a willing investor.
“If you have not reached maximum market penetration and if your business is fairly scalable — meaning it can be replicated beyond the domain that you’ve already taken up — then [you] would be open to interest from a private equity firm,” Fink says.
Still, you have to research each firm relentlessly.
“Aside from getting married, this is one of the most important decisions in your life — even more than buying the right house or the right car,” he says.
Begin your search on the Internet. Each firm’s Web site should answer most of your questions. If the Web sites don’t, the missing information should speak louder than what is there.
Be wary, for example, if the principals don’t post their resumes. You should be able to track their expertise to separate business-savvy investors from merely wealthy ones. After all, your new partners will put more than money into your business; they will become consultants, as well.
Small details about the company are just as important as obvious red flags like lawsuits. Examine the company’s holding pattern. The difference between keeping a company two years and 10 years may mean it either wants to “fatten the calf ... and sell it again or ... really polish the diamond,” Fink says.
Look outside of the firm, too, for the full picture.
“Interview some of their portfolio companies,” he says. “Any private equity company that won’t allow you to talk to some of their clients — run.”
Ask the CEOs of those companies how they think they’ve benefited as well as what their customers think. Find out how many employees have remained since the acquisition.
“Do the principals feel that they’re better off? Did [the firm] really add value or did they only add money and micromanage it to death?” Fink says, emulating the line of questioning that lead him to Blue Point Capital Partners.
Because you won’t be the only one interacting with the new partners, set up social events so your managers can see who they may be working with. Before the sale, Fink organized dinners and other casual meetings and even arranged for the principals to have one-on-one interviews with his senior staff members.
“I want them to feel comfortable conversing with these folks just as much as I do,” says Fink, who set the communication in motion before the contracts were even signed.
Find benefit for everyone
Fink, who describes himself as a consensus leader, took the idea beyond C-level executives before he started the search. Many leaders make the mistake of waiting until they’ve found a firm to ask everyone’s approval, but Fink says that conversation should come before the process begins.
He told his employees that the acquisition he was considering would not bump him out of the picture and that he would still run the company on a day-to-day basis. The only change would be more growth opportunities.
Even then, some employees hesitated. “The fear is that you’re simply trying to get them to go along and not telling them the whole story,” Fink says. “That isn’t necessarily based on me; it’s based on what people have seen in the business world.”
To satisfy those employees reluctant to buy in, you should offer an exit in return for their willingness to try. Fink asked his employees to commit to a 30-day trial after the sale. If they were unsatisfied, a severance package was on the table.
After that month, only two employees opted for the alternative. Fink is still working to keep the remaining employees satisfied.
“You have to act with brimming confidence just as you did before the sale,” Fink says. “If you say nothing’s changed, but when someone comes to you, you say, ‘That’s not my problem,’ or, ‘I’ll have to check with the new owners and get back to you,’ then something did change. You’re no longer as engaged.”
Your employees will be watching your actions and measuring them against the promises you made upfront, so be consistent. Don’t start taking longer vacations or even longer lunch breaks. They’ll notice your diligence slipping if you pass responsibility to the new partners.
Constant communication will keep them enthusiastic about the acquisition. Most employees will not have contact with the new partners, so you must act as the medium. In staff meetings and e-mails, share anecdotes you learn about the partners or provide details about decisions they helped you make.
Employees have to see the benefits directly, as well. Part of Fink’s deal with the firm was that employees would receive pay increases as the company’s revenue grew.
“You’ve got to keep showing them the benefits,” Fink says. “People will accept change if they can really intellectually believe that it’s going to not only make the organization better but, at the end of the day, help them.”
Prepare employees to perpetuate success
While you’re evaluating what your company could gain from a partnership, you also need to pinpoint what you’re not willing to give up. Fink identified AWP’s core competencies of safety, flawless execution and on-time performance as nonnegotiable items.
“If a new partner came in and said, ‘You’re spending a lot of money on training. Do we really need all this training?’ Yes, we do; that’s made us who we are,” Fink says. “A lot changes if we’re not dedicated to flawless execution through first-rate training.”
Firmly establish those core issues upfront. Fink says you shouldn’t be timid about it — obviously the firm approves of how you’re already running the business because it agreed to get involved.
“In terms of setting the stage with your new partners, you have to let them know right from beginning the soul of the organization is not negotiable,” he says. “You set the ground rules and communication pattern right from the beginning, which says, No. 1, I don’t compromise on core issues and No. 2, if you want me to run the business, then let me continue to make the dayto-day decisions.”
After you’ve established those ground rules, stick to them. Measure every idea that comes through your new partners against your original core issues, and don’t let the measuring stick slacken because you’re excited about a new prospect.
Fink and his managers meet formally with the partners once a month. To continue to build that relationship, you need to be open with them about the company’s performance and whether you’re on track to meet goals. If you’re struggling, ask for their help.
“You have to be committed to take their advice,” he says.
For example, Blue Point recommended associations and personal acquaintances to help AWP find a professional recruiter within three weeks, after Fink had “floundered around” trying to find one for six months on his own. Now, only two months after the sale was finalized, AWP is looking at about a dozen potential acquisitions thanks to its new partners.
Monthly meetings are a good way to revisit those big-picture goals, but they shouldn’t be the only communication. Fink e-mails his partners regularly to inform them of an achieved goal or a brewing problem, especially if it needs to be addressed before the next scheduled meeting.
“They may have some insight as to how I might approach that problem or look at it in different way,” he says. “What any entrepreneur who sells a business to a private equity firm has to understand is: They now own the car, but I’m still driving. Having the authority to drive the car doesn’t mean you drive it wherever you want and however you want without some measure of consultation.”
Fink’s goal is to equip employees to run the business without his constant oversight. To do that, he encourages his senior staff members to use their direct access to Blue Point. He wants them to solicit opinions and broaden their perspectives so their decisions are not always centered on him.
“What the wise leader has to say is, in terms of perpetuating the business well into the future, that perpetuation doesn’t come strictly through the infusion of money or adding more business,” he says. “It comes through the top management of the company being able to better run the company. My top managers need to be equipped with as broad of a perspective, as much knowledge, as much information as they possibly can, and the only way they can do that is to seek out other opinions.”
Giving managers that liberty to seek advice elsewhere can be a struggle. Fink focuses on three points to keep his attitude in check during the transition of power.
“No. 1, you didn’t retire,” he says, reminding himself of the message he gave employees before the acquisition. “Now is not the time to take it easy. You need to be more engaged in your business than ever before. Even if your motivation in selling was to eventually retire, in near term, you can’t retire.”
Second, leaders need to realize that their position is no longer one of dictatorship. Phrases like, “Because I said so,” or, “Because I’m the owner,” need to be deleted from your vocabulary. Instead, you need to cooperate with new partners and old employees alike to make decisions based on all the perspective you can gather.
Thirdly, Fink looks at partnering with a private equity firm as an opportunity to develop his versatility as a leader. The experience requires you to adapt, motivate employees in a new situation and expand your vision to include the company’s well-being, not just your own.
“A marriage between a private equity firm and an entrepreneur, if done right, is a wonderful business succession strategy because it marries two very vital concerns,” Fink says. “It marries the continuity issue with the succession issue. Yes, I’m still in charge, but now there’s at least a template that if something were to happen to me, this business is secure going forward.”
HOW TO REACH: Area Wide Protective Inc., (800) 343-2650 or www.awptrafficsafety.com