Elements of an effective M&A strategy
John Ensign oversees MRI Software’s aggressive M&A strategy
John Ensign doesn’t have much downtime. But that comes with the job at MRI Software.
Since he joined the real estate software solutions provider in 2010, MRI has made more than 20 acquisitions, including one announced earlier this month.
“With heavy deal volume definitely comes a bit of chaos,” says Ensign, MRI’s president and chief legal officer. “You’re not going to be able to control every aspect of the process. You’re not going to know everything when you have three or four deals going on all at once, and they all have competing deadlines and rely on shared resources to get done.”
Though it’s a constant challenge, Ensign has helped steer the aggressive acquisition strategy in the right direction. “We’ve had a good run of finding companies with the right people, cultures and products to fit what MRI is doing and where we’re going,” he says.
In this week’s Dealmaker Strategies, we talk to Ensign about the elements of an effective M&A strategy.
Modesty is a valuable skill to have when you’re exploring an acquisition, Ensign says. It sets a tone of camaraderie that can go a long way toward making a deal work long term.
“As you’re learning about someone else’s business and how they run it, you discover there are a lot of ways to run a great company,” Ensign says. “We have a way. That doesn’t make it the best way. We take that into account that as we’re looking into acquisitions and understanding the companies and the teams and how they operate. We don’t have all the answers. We’ll have a high-level plan coming in. But one thing we’ve learned is that what we know about a business during the diligence process is a lot different than what we know four weeks after we own it.
Have a shared strategic vision
Each company has its own structure. One of the keys to an effective acquisition strategy is maximizing everyone’s skills and talents, so they can better inform your M&A decisions.
“We have two private equity sponsors currently invested in the company, and we spend a significant amount of time building out that shared strategic vision,” Ensign says. “So, where are we trying to go, and what are the pieces we need to get there?”
Ensign has been part of both companies and growth strategies where the path is much more random.
“So, something down the street is for sale: It’s an acquisition. Let’s grab it,” he says. “That can obviously lead to a lot of challenges. When I look at why we’ve been successful, especially at MRI, it’s because we’ve had really good results from the acquisitions that we’ve made. It comes back to that shared strategic vision.”
Focus on what matters
MRI buys a lot of companies that Ensign refers to as ‘mature startups’.
“They’re not enormous companies, but they’re certainly not what you think of as startups,” he says. “They have revenue, they are established, they have a nice client base, and they have systems and processes in place.”
The goal isn’t to buy huge businesses and simply watch the revenue grow exponentially, Ensign explains. You want to develop a targeted approach that boosts your odds of a successful deal.
“We don’t think of our goals in the context that we want to hit a certain revenue number,” he says. “We certainly have financial metrics that drive the business on a year-over-year basis. But if we look at our five- or 10-year plan, it isn’t about having this much in revenue or this much profitability.
“It’s more about: Where are we in the marketplace? What markets are we serving? What clients are we serving? Where are we from an employee engagement perspective? Where are we from a client engagement perspective? Are our retention rates improving from a client perspective? Those are the things we’re really focused on.”